Komercni Banka: Vitamin D(ividend) benefits (stays BUY)
We keep our BUY on Komercni Banka and set our updated 12M price target (PT) at CZK 928/share, offering 17% upside, with the bank’s superior dividend potential in the coming years its key attraction, in our view. Our bullish scenario assumes that the combined yield on dividend flow that we expect in the next 12 months lands at c.14%, at the current valuation juncture. Also, we believe that earnings should recover further in 2022E, fuelled by the market interest rates tailwind supporting the NII. The juncture of capital optimisation and earnings recovery should result in a 2023E ROE of 11%+, on our estimates. Komercni trades at a 2022E P/BV of 1.3x vs. the 5Y consensus average of 1.4x. It trades at our 2021-22E P/Es of 16.0-12.4x, just 1-9% ahead of its CEE peers’ medians. There is some small upside for our valuation, but the key attraction remains its dividend potential. All the regional banks’ trading multiples seem to have advanced, given the share price performances seen in recent months. However, we keep a moderately positive view on the banking sector, as 2021E is only the first step towards an earnings recovery and, if our forecasts prove to be right, in general, the earnings growth should be fast in 2022E and provide more fuel for Komercni’s share price performance, in our view.Komercni banka is a universal banking group based in the Czech Republic. Co. is engaged in the provision of a range of financial services in retail, corporate and investment banking. Co.'s operating segments include: Retail Banking, the provision of products and services to individuals, such as among others building savings, pension insurance, overdrafts, credit card and personal loans and mortgages; Corporate Banking, the provision of products and services to corporate entities such as foreign currency and derivative products, syndicated and export financing, and guarantee transactions; and Investment Banking, which involves trading in financial instruments.
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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