TCS Group Holding: Time to take a hard look (downgraded to HOLD)
We have downgraded TCS to HOLD (from Buy). Our new price target (PT) is USD 27.8/share. The bank is trading at 7.4x P/E and 2.2x P/TBV, on our 2021E estimates. It has been a good ride, but we do not see the current levels as offering a substantial margin of safety for investors. We believe that unsecured lending will be the battle ground in the Russian banking sector, as there is little money to be made in mortgages or corporates in this backdrop. Our line of thought on the longer-term ROE normalisation has not changed and our set of assumptions does not leave a significant amount of upside in the valuation. We also believe that the short duration of the macro shock has played a major role in the surprisingly positive asset quality trends. By the same token, a second wave of the virus would reverse these trends. If we think about it tactically, we do not believe that the stock is pricing in this tail risk heavily yet.TCS Group Holding is a retail banking services group based in the Russian Federation. Co. is principally engaged in providing retail banking services in the Russian Federation through its subsidiaries, primarily Tinkoff Credit Systems. Co., through this subsidiary, fully licensed by the Central Bank of Russia and a member of the Deposit Insurance System, specializes in credit cards. Co. provides online retail financial services through a branchless operating platform. Co. also offers remote access to its financial products and services through its online banking as well as through mobile banking and high-volume call centers.
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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