ABL: At an unjustified valuation discount; upgrade to Buy
- We upgrade our stance on ABL to Buy from Neutral with a revised TP of PRs115/sh following above expected 1QCY18 results (EPS: PRs3.36 vs. our expectation of PRs2.90). We have raised our CY18-22F EPS estimates for ABL by 9% on average. Superior asset quality, improved capital gains realization and an efficient cost structure underpin our liking for ABL.
- Although pickup in NIMs may be slow compared to peers, we draw attention to robust asset quality, where the bank posted its 8th consecutive quarterly provisioning reversal in 1QCY18. We believe limited exposure to the SME & Consumer segments should prevent fallout on asset quality even if interest rates rise quickly.
- We project ABL’s ROE (including surplus) increasing to 16% by CY22F, from c. 13% in CY18F. Over the medium-term, this is a higher number compared to BAFL’s ROE for instance. And yet ABL currently trades at a CY18F P/B of 1.0x, at a 10%+ discount to BAFL, even as ABL also offers a much higher D/Y of 8% backed by its strong CAR. We do not think this valuation discount is justified.
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.