Intermarket Pulse: ABL: Balance sheet strength deserves better multiples
- We raise our CY18F EPS estimates for ABL by 4% (CY19F estimates are unchanged) and extend our projections horizon by a year, which raises our Dec’18 TP to PRs101/sh from PRs92/sh previously. Revision in earnings is due to likely continuation of provisioning reversals this year as well. We are Neutral on the stock.
- ABL should post flattish earnings in CY18F (EPS: PRs11.20), but can embark on sustained c. 15%YoY growth from CY19F onwards as NIMs lift, and as the impact of a larger balance sheet and low credit costs filters through to the bottomline. Accordingly, both ROA and ROE should depict a secular expansion from CY19F.
- ABL trades at a CY18F P/B of 0.95x and P/E of 8.35x where we have assumed super tax will extend for another year. While ABL shed 29% in CY17, we see improved price performance going forward on the back of (i) ROE expansion over the medium-term, (ii) strong CAR which can support high payouts (CY18F D/Y: 7.5%) and (iii) bank-specific issues for peers that make ABL’s defensive characteristics stand out.
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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