Bank of Cyprus: Deeply undervalued (upgraded to BUY)
We hosted a virtual roadshow with Bank of Cyprus’ management last week and took the opportunity to revisit our investment case. The stock is down 59% ytd and it trades at extremely low valuation multiples (P/TBV and price to pre-provision profitability of 0.13x and 1.1x, respectively, P/Es of below 3x from 2022E-onwards). We believe these valuation levels are extreme, on: 1) the de-risking exercise ahead of its Greek peers, with the NPE ratio at 22%; 2) its high NPE cash and total coverage (58% and 125%, respectively), and recent NPL trades, which imply that the bank can reach a single-digit NPE ratio, with marginal capital destruction; 3) the capital ratios (TCR of c.17.9%), which are above the minimum requirements, while the DTC exposure is low (22% of capital); 4) the bank being profitable already and, if we exclude COVID-19 related provisions, the sustainable ROTE levels are close to 7%; and 5) the hidden value from a profitable insurance business. We have upgraded the stock to BUY and set our new price target (PT) at EUR 0.90/share.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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