NLB Banka: Good story, unattractive price (downgraded to SELL)
We have had NLB Banka ad Skopje as a Hold since our initiation last year. In the past 12 months, however, the stock has returned 62.3% and we downgrade NLB Banka to SELL in this report, in view of the large increase in the valuation multiples, on our estimates, to 1.6x P/BVs for both 2021 and 2022E. Despite the bank’s growth profile and strong ROEs, north of 14%, on average, over our forecast period, we see them as too excessive, as the premia vs. the peer median now lands at 21-37%. On P/E, the premia are a touch lower: 24-31% for 2021-22E. We have also fine-tuned our 2021E estimates, to reflect the 9M21 performance, and increased our 2021E net income estimate by 11%. At the same time, we have reduced (1-3%) our 2022-23E estimates slightly. This is reflected in our price target (PT), which we have increased to MKD 24,158/share (from MKD 21,034/share), which implies downside of c.15%, hence our SELL recommendation.
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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