Modest capital raise, as expected

FRC announced its first share offering of the year and is set to raise 2.0-2.3m shares in a range of $101-103, which should raise $200-240m. We were already forecasting a capital raise of 2.0m shares this quarter so the impact on our forecasts is minimal. If management exercises the greenshoe then the additional 0.3m shares will be 0.2% dilutive to our FY19 EPS but 0.2% accretive to BVPS. The share offering is priced at around 2.2x 2018E BV and 18.5x 2019E EPS. The capital injection will boost the bank's CET1 ratio by 30bp, allowing the bank to capture growth opportunities while maintaining a strong capital position. From an investment perspective, we forecast adj. EPS growth of 11% in FY18 before rising to 15% in FY19. In addition, we forecast BVPS growth of 9% in FY18 rising to 13% in FY19. We believe that these strong growth rates justify the PE multiple of 19x FY19E and reiterate our Overweight recommendation.