BRD-GSG: Price decline creates BUYing opportunity (stays BUY)
BRD-GSG’s share price has fallen more than 20% over the past two months, and it now trades at a 2018E P/B of 1.16x and a P/E of 6.9x, on our estimates. The bank reported strong 1Q18 net profit, at RON 411.3m, up 26% yoy, driven by more reversals in terms of the cost of risk, and we believe that these are likely to continue over the coming quarters as the bank is recovering further from its non-performing exposures. As a result, we now estimate RON 67m in reversals for FY18E, and a cost of risk of 0.3% for 2019E and 0.7% for 2020E. Our net profit estimates are up 35% to RON 1,259m for 2018E and 30% to RON 1,220m for 2019E. We have also incorporated a higher risk free rate and a higher beta due to the increase in government security yields, but also higher market volatility, resulting in a cost of equity of 11%. Having also adjusted for the recent dividend payment, our price target (PT) has moved slightly lower, to RON 16.7/share, or 35% upside. We maintain our BUY rating.
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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