MEBL_Natural antibodies to counter headwinds, (AKD Daily, May 29, 2020)
AKD Daily
MEBL: Natural antibodies to counter headwinds
- Branch additions (159 branches added in the past two years), non-linkage of deposit cost to policy rate, and Govt.’s intent to tap Islamic banking resources to raise financing (PkR750bn Ijarah Sukuks targeted, PkR200bn Power Sukuk II bidding complete) should buttress MEBL’s bottom-line from steep decline in interest rates over the medium run.
- Smoothening of possible provisioning costs (PkR1bn general provision booked in Mar’20) in lieu of underline risks from COVID-19 and expiry of SBP relief period provide confidence on the future outlook of the bank. We have incorporated cost of provisioning of 0.9/1.0% for CY20/21F into our estimates.
- The stock is currently trading at a historic low CY20/21F P/B of 1.1/0.9x, where on past valuation metrics, it should trade at a forward P/B of 1.4x. We have a ‘Buy’ stance on the stock with a one-year TP of PkR100/sh where assuming dividend payout of yesteryears, MEBL offers a dividend yield of 10.1%. That said, staggered accumulation and long term investment horizon is advised considering sectoral headwinds in short to medium run.
- MEBL posted above expectation results in 1QCY20 where despite drags from general loss reserve charge of PkR1bn and loss from associate of PkR0.9bn, the bank’s NPAT clocked in at PkR4.94bn (EPS: PkR3.91) – flat QoQ.
AKD Research
Meezan Bank Limited is an Islamic commercial bank. The Bank is engaged in corporate, commercial, consumer, investment and retail banking activities. It offers a range of Islamic banking products and services through a retail banking network of over 550 branches in approximately 140 cities to its corporate, commercial and small and medium-sized enterprise (SME) customers based on their financial requirements. It provides personal banking, business banking, premium banking and branchless banking. The Bank also offers Meezan Rupee Current Account, Karobari Munafa Account, Meezan Rupee Savings Account, Meezan Business Plus Account, Meezan Bachat Account, Meezan Kids Club Account, Meezan Teens Club Account, Meezan Asaan Current Account, Meezan Kafalah, Certificates of Islamic Investment, Meezan Amdan Certificate and Dollar Mudarabah Certificate. It has assets in agriculture, food, forestry and fishing; cement, and others. The Bank operates only in Pakistan.
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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