Narrow-Moat BOCHK Reports Mixed 3Q Update; Valuation Looks Attractive
Bank of China Hong Kong provided a mixed third-quarter update, and our fair value estimate is unchanged at HKD 39.20. The bank is attractively priced after a sharp decline in its share price after results were released. Our fair value represents a price/book of 1.7 times, supported by forecast return on equity of 14% over the next five years. A discount to fair value of 25% is a large enough margin of safety, in our view. From a quality perspective, the narrow-moat-rated bank benefits from cost ...BOC Hong Kong is an investment holding company, engaged in the provision of banking and related financial services in Hong Kong. Co.'s segments include: Personal Banking, Corporate Banking, Treasury, and Insurance. Both the Personal Banking and Corporate Banking segments provide general banking services. The Treasury segment manages funding and liquidity, and the interest rate and foreign exchange positions of Co. in addition to proprietary trades. The Insurance segment represents business mainly relating to life insurance products, including individual life insurance and group life insurance products. As of Dec 31 2014, Co. had total assets of HK$2,189,367,000,000.
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