Intermarket Pulse: BAFL: Earnings beat in 1QCY18 neutralized by super tax
- Although BAFL reported above-expected 1QCY18 results (EPS: PRs2.02; up 13%YoY), continuation of Super Tax over the next few years (albeit progressively lower by 1% pa) compels us to trim our CY18-22F EPS estimates for BAFL by 4% on average. As a result, our Dec'18 TP now stands at PRs52/sh; maintain Neutral.
- Taking cue from 1QCY18 results, we remain positive on BAFL given (i) tighter cost control, (ii) NIM expansion from CY19F (converging to 4% by CY20F), (iii) robust fee income, (iv) stable asset quality and (v) adequate capital buffer on both CET-1 and CAR. B/S growth also remains strong, with 5yr loan CAGR projected at 11.5%.
- Positives should enable BAFL to post a strong earnings growth trajectory going forward where projected 3yr NPAT CAGR is a high 15%. The bank trades at a CY18F P/B of 1.1x and P/E of 8.6x while offering a D/Y of 4%. While the latter is modest, we think 30-40% cash payout ratio is sustainable, where we do not see need for any further capital raising, Tier I or Tier II, over the medium-term.
Bank Alfalah Limited is a holding company. The Company's segments include Retail banking, including loans, deposits, trading activity, wealth management and other banking transactions with its retail and middle market customers; Corporate banking, which includes loans, deposits, project financing, trade financing, investment banking and other banking activities with its corporate and public sector customers; Treasury, including liquidity management activities carried out through borrowing, lending and money market operations; Consumer banking, including constitutes consumer financing activities with individual customers; Islamic banking, pertaining to its full scale Islamic Banking operations; International operations, which includes amounts related to its overseas operations, namely, commercial banking activities in Bangladesh and Afghanistan, and wholesale banking activities in the Kingdom of Bahrain, and Others, including merchant banking related activities.
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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