ABL: Lacking the vibe; revise down TP to PkR125
​We revise down our Dec’17 TP for ABL to PkR125/sh (from previous PkR135/sh), but maintain Buy stance courtesy recent price correction. Following lower-than-expected 4QCY16 financial result, we trim our EPS estimates for CY17/18F by 7%/10% to PkR13.23/13.62, due to (i) lower loan growth, (ii) higher C/I, and (iii) lower interest rate assumption.
On a consolidated basis, ABL posted NPAT of PkR14.7bn (EPS: PkR12.84) in CY16, down 4%YoY. For 4QCY16, earnings of PkR2.03/sh (down 29%YoY) came in lower-than-expected on account of (i) 22%YoY drop in NII, and (ii) surprising 18%YoY jump in admin expenses.
ABL is currently trading at a C17F P/B of 1.16x and P/E of 8.19x, which are at a considerable discount to peer banks. Other than the relative illiquidity, limited earnings growth (due to reluctance to push advances) may lead to persistent valuation discount; underperformance to peer banks can further support this argument.
Allied Bank Ltd. Allied Bank Limited is engaged in providing commercial banking and related services. The Bank's segments include Corporate & investment banking, Trading and sales (Treasury), Commercial & retail banking and Others. The Corporate & investment banking segment offers a range of financial services to medium and large sized public and private sector entities, and also covers overseas operation of the Bank. These services include providing and arranging tenured financing, corporate advisory, underwriting, cash management, corporate finance products and customer services. The Trading and sales (Treasury) segment undertakes the Bank's treasury and money market activities. The Commercial & retail banking segment provides services to commercial and retail customers, including agriculture sector. The Commercial & retail banking segment offers loans, deposits and other transactions to commercial and retail customers. Its other services include phone banking and utility bill payments.
Intermarket Securities Limited (IMS) is a full service corporate brokerage firm based in Karachi, Pakistan. We service both domestic and international clients. IMS was ranked #2 Best Local Brokerage and #3 Best for Overall Country Research for 2016 by AsiaMoney.
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