1Q15 review: Earnings ahead of consensus estimate; Maintain Hold
`
Bank AlJazira Banks | 1Q 2015 Preliminary Results | April 15, 2015
1Q15 review: Earnings ahead of consensus estimate; Maintain Hold 1Q15 net profit beats consensus estimate: Bank AlJazira reported 1Q15 Net Profit of
Rating Summary Recommendation
Hold
Target price (SAR)
29.3
Upside
1.0%
SAR227mn (+c.14% qoq, +c.43% yoy) which has beaten consensus estimate by c.21%. Operating performance was strong as well with operating income at SAR624mn (c.+12%
Stock Details
qoq, c.+21%yoy) and Net Special Commission Income (NSCI) at SAR396mn (+c.2% qoq,
Closing price*
+c.23% yoy). Furthermore, quarterly NSCI margin (calculated on average total assets) is estimated at 2.33%, implying c.19bps yoy expansion and broadly stable sequentially. At the sector level, of the ten banks’ 1Q15 results released so far, while seven has beaten
SAR
29.0
Market capitalization
SAR Mn
Shares outstanding
Mn
400
52-Week High
SAR
39.3
52-Week Low
SAR
25.0
consensus, yoy profit growth was modest (Net Profit/NSCI +c.4%/7% yoy) although credit
Price chg. (YTD)
growth (Credit/Deposit +c.9%/ 8% yoy) remained reasonably healthy.
Ticker (Reuters/ Bloomberg)
Strong volume growth; improvement in liquidity position is a positive: Besides the
* as of April 14, 2015
11,600
%
4.4
1020.SE
BJAZ AB
strong earnings beat, 1Q15 results indicate that volume growth at AlJazira continues to remain healthy. While total assets grew c.14% yoy and net financing portfolio expanded 11%
Key Shareholding (%)
yoy, customer deposits also registered a healthy c.14% yoy growth in 1Q15 (vs. system
Union Brothers for Development
6.6%
assets/loans/deposits c.11%/11%/11% yoy, as per latest SAMA data as of February 2015).
The National Bank of Pakistan
5.8%
Saleh Abdullah Mohamed Kamel
5.0%
The Net Financing to Customer Deposit ratio improved to c.74% in 1Q (vs. 4Q14 c.76%) indicating that headroom exists to support a double-digit growth in the Net Financing portfolio. As per SAMA data, AlJazira added 2 new branches, 10 new ATMs and added one Point Of Sale (PoS) terminal during the first two months of 1Q15. Trades at 1.7x 2015E P/BV; Maintain Hold: Considering Bank AlJazira has the lowest
2015E
2016E
P/E (x)
14.1
11.1
P/Pre-Provision Profit (x)
10.1
8.4
1.7
1.5
Valuation
P/B (x)
NSCI margin (2.33%) amongst the peer group of the ‘pure play’ Islamic banks (1Q 2015: Al Bilad: 2.38%; Alinma: 2.67% and Al Rajhi: 3.14%), sequential margin stability and yoy margin
Stock price movement vs. TASI
expansion is a positive. Furthermore, while we like management’s move to raise SAR3bn
KSA/GCC Bank peers (KSA: 1.4x & GCC: 1.4x). All in all, post publication of 1Q results, we
110 90
Jan-15
Mar-15
Oct-14
Dec-14
Jul-14
Sep-14
Jun-14
Apr-14
Jan-14
Bank Al Jazira
Feb-14
Oct-13
Nov-13
70
Jul-13
and the stock currently trades at 2015E P/B of 1.7x which is at a moderate premium to
130
Aug-13
Bank Jazira shares has underperformed (c.+4% vs. KSA Banks index c.+8%, TASI c.+7%)
150
Apr-13
customer deposits in 4Q14 vs. c.65% for the system) are other key issues. On a Ytd basis,
170
May-13
AlBilad 59.2%) coupled with high-cost funding base (demand deposits c.48% of total
190
Jan-13
we believe high cost to income ratio (2014: 57.2% vs. Al Rajhi 33.1%, Alinma 45.2% and
210
Feb-13
capital through a rights issue (low Tier 1 Capital ratio of c.11.8% in 4Q14 was a key concern),
TASI Bank
maintain our Hold rating on the stock with an unchanged target price of SAR29.3/share. 1Q15
Cons*
% Dev
4Q14
% Qoq
1Q14
% Yoy
Net Special Commission Income (NSCI)
396
na
na
390
2%
322
23%
Net Profit
227
187
21%
199
14%
159
43%
Total Assets
69,373
na
na
66,554
4%
60,641
14%
Net Financing
40,873
na
na
41,245
-1%
36,683
11%
Customer Deposits
55,420
na
na
54,569
2%
48,468
14%
SAR mn
Sources: Company, Tadawul, Bloomberg and Saudi Fransi Capital
Sources: Tadawul and Saudi Fransi Capital
Sector Coverage Dipanjan Ray [email protected] +966-1-12826861 AbdulAziz Jawdat [email protected] +966-11-2826856
CONFIDENTIAL
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
Bank AlJazira Banks | 1Q 2015 Preliminary Results | April 15, 2015
Recommendation Framework BUY: The analyst recommends a BUY when our fair value estimate is at least 10% higher than the current share price. HOLD: The analyst recommends a HOLD when our fair value estimate ranges within ±10% of the current share price. SELL: The analyst recommends a SELL when our fair value estimate is lower by more than 10% from the current share price.
CONFIDENTIAL
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
Bank AlJazira Banks | 1Q 2015 Preliminary Results | April 15, 2015
Contacts RESEARCH & ADVISORY DEPARTMENT [email protected]
SAUDI FRANSI CAPITAL Call Centre 800-125-9999 Website www.sfc.sa
SAUDI FRANSI CAPITAL LLC C.R. 1010231217, PO Box 23454, Riyadh 11426, Saudi Arabia, Head Office Riyadh
Authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
CONFIDENTIAL
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
Bank AlJazira Banks | 1Q 2015 Preliminary Results | April 15, 2015
Disclaimer This report is prepared by Saudi Fransi Capital (“SFC”), a fully-fledged investment firm providing investment banking, asset management, securities brokerage, research, and custody services. SFC, and its affiliate, might conduct business relationships with the company that is subject of this report and/ or own its security. This report is based on current public information that we consider reliable, but we do not represent it is accurate or compl ete, and it should not be relied on as such. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information and opinions contained in this report. This report is intended for general information purposes only, and may not be reproduced or redistributed to any other person. This report is not intended as an offer or solicitation with respect to the purchase or sale of any security. This report is not intended to take into account any investment suitability needs of the recipient. In particular, this report is not customized to the specific investment objectives, financial situation, risk appetite or other needs of any person who may receive this report. SFC strongly advises every potential investor to seek professional legal, accounting and financial guidance when determining whether an investment in a security is appropriate to his or her needs. Any investment recommendations contained in this report take into account both risk and expected return. To the maximum extent permitted by applicable law and regulation, SFC shall not be liable for any loss that may arise from the use of this report or its contents or otherwise arising in connection therewith. Any financial projections, fair value estimates and statements regarding future prospects contained in this report may not be realized. All opinions and estimates included in this report constitute SFC’s judgment as of the date of production of this report, and are subject to change without notice. Past performance of any investment is not indicative of future results. The value of securities, the income from them, the prices and currencies of securities, can go down as well as up. An investor may get back less than what he or she originally invested. Additionally, fees may apply on investments in securities. Changes in currency rates may have an adverse effect on the value, price or income of a security. No part of this report may be reproduced without the written permission of SFC. Neither this report nor any copy hereof may be distributed in any jurisdiction outside the Kingdom of Saudi Arabia where its distribution may be restricted by law. Persons who receive this report should make themselves aware of, and adhere to, any such restrictions. By accepting this report, the recipient agrees to be bound by the foregoing limitations.
Saudi Fransi Capital LLC; C.R. 1010231217, P.O Box 23454, Riyadh 11426, Saudi Arabia, Head Office – Riyadh. Authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
CONFIDENTIAL
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
Bank AlJazira Banks | 1Q 2015 Preliminary Results | April 15, 2015
1Q15 review: Earnings ahead of consensus estimate; Maintain Hold 1Q15 net profit beats consensus estimate: Bank AlJazira reported 1Q15 Net Profit of
Rating Summary Recommendation
Hold
Target price (SAR)
29.3
Upside
1.0%
SAR227mn (+c.14% qoq, +c.43% yoy) which has beaten consensus estimate by c.21%. Operating performance was strong as well with operating income at SAR624mn (c.+12%
Stock Details
qoq, c.+21%yoy) and Net Special Commission Income (NSCI) at SAR396mn (+c.2% qoq,
Closing price*
+c.23% yoy). Furthermore, quarterly NSCI margin (calculated on average total assets) is estimated at 2.33%, implying c.19bps yoy expansion and broadly stable sequentially. At the sector level, of the ten banks’ 1Q15 results released so far, while seven has beaten
SAR
29.0
Market capitalization
SAR Mn
Shares outstanding
Mn
400
52-Week High
SAR
39.3
52-Week Low
SAR
25.0
consensus, yoy profit growth was modest (Net Profit/NSCI +c.4%/7% yoy) although credit
Price chg. (YTD)
growth (Credit/Deposit +c.9%/ 8% yoy) remained reasonably healthy.
Ticker (Reuters/ Bloomberg)
Strong volume growth; improvement in liquidity position is a positive: Besides the
* as of April 14, 2015
11,600
%
4.4
1020.SE
BJAZ AB
strong earnings beat, 1Q15 results indicate that volume growth at AlJazira continues to remain healthy. While total assets grew c.14% yoy and net financing portfolio expanded 11%
Key Shareholding (%)
yoy, customer deposits also registered a healthy c.14% yoy growth in 1Q15 (vs. system
Union Brothers for Development
6.6%
assets/loans/deposits c.11%/11%/11% yoy, as per latest SAMA data as of February 2015).
The National Bank of Pakistan
5.8%
Saleh Abdullah Mohamed Kamel
5.0%
The Net Financing to Customer Deposit ratio improved to c.74% in 1Q (vs. 4Q14 c.76%) indicating that headroom exists to support a double-digit growth in the Net Financing portfolio. As per SAMA data, AlJazira added 2 new branches, 10 new ATMs and added one Point Of Sale (PoS) terminal during the first two months of 1Q15. Trades at 1.7x 2015E P/BV; Maintain Hold: Considering Bank AlJazira has the lowest
2015E
2016E
P/E (x)
14.1
11.1
P/Pre-Provision Profit (x)
10.1
8.4
1.7
1.5
Valuation
P/B (x)
NSCI margin (2.33%) amongst the peer group of the ‘pure play’ Islamic banks (1Q 2015: Al Bilad: 2.38%; Alinma: 2.67% and Al Rajhi: 3.14%), sequential margin stability and yoy margin
Stock price movement vs. TASI
expansion is a positive. Furthermore, while we like management’s move to raise SAR3bn
KSA/GCC Bank peers (KSA: 1.4x & GCC: 1.4x). All in all, post publication of 1Q results, we
110 90
Jan-15
Mar-15
Oct-14
Dec-14
Jul-14
Sep-14
Jun-14
Apr-14
Jan-14
Bank Al Jazira
Feb-14
Oct-13
Nov-13
70
Jul-13
and the stock currently trades at 2015E P/B of 1.7x which is at a moderate premium to
130
Aug-13
Bank Jazira shares has underperformed (c.+4% vs. KSA Banks index c.+8%, TASI c.+7%)
150
Apr-13
customer deposits in 4Q14 vs. c.65% for the system) are other key issues. On a Ytd basis,
170
May-13
AlBilad 59.2%) coupled with high-cost funding base (demand deposits c.48% of total
190
Jan-13
we believe high cost to income ratio (2014: 57.2% vs. Al Rajhi 33.1%, Alinma 45.2% and
210
Feb-13
capital through a rights issue (low Tier 1 Capital ratio of c.11.8% in 4Q14 was a key concern),
TASI Bank
maintain our Hold rating on the stock with an unchanged target price of SAR29.3/share. 1Q15
Cons*
% Dev
4Q14
% Qoq
1Q14
% Yoy
Net Special Commission Income (NSCI)
396
na
na
390
2%
322
23%
Net Profit
227
187
21%
199
14%
159
43%
Total Assets
69,373
na
na
66,554
4%
60,641
14%
Net Financing
40,873
na
na
41,245
-1%
36,683
11%
Customer Deposits
55,420
na
na
54,569
2%
48,468
14%
SAR mn
Sources: Company, Tadawul, Bloomberg and Saudi Fransi Capital
Sources: Tadawul and Saudi Fransi Capital
Sector Coverage Dipanjan Ray [email protected] +966-1-12826861 AbdulAziz Jawdat [email protected] +966-11-2826856
CONFIDENTIAL
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
Bank AlJazira Banks | 1Q 2015 Preliminary Results | April 15, 2015
Recommendation Framework BUY: The analyst recommends a BUY when our fair value estimate is at least 10% higher than the current share price. HOLD: The analyst recommends a HOLD when our fair value estimate ranges within ±10% of the current share price. SELL: The analyst recommends a SELL when our fair value estimate is lower by more than 10% from the current share price.
CONFIDENTIAL
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
Bank AlJazira Banks | 1Q 2015 Preliminary Results | April 15, 2015
Contacts RESEARCH & ADVISORY DEPARTMENT [email protected]
SAUDI FRANSI CAPITAL Call Centre 800-125-9999 Website www.sfc.sa
SAUDI FRANSI CAPITAL LLC C.R. 1010231217, PO Box 23454, Riyadh 11426, Saudi Arabia, Head Office Riyadh
Authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
CONFIDENTIAL
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
Bank AlJazira Banks | 1Q 2015 Preliminary Results | April 15, 2015
Disclaimer This report is prepared by Saudi Fransi Capital (“SFC”), a fully-fledged investment firm providing investment banking, asset management, securities brokerage, research, and custody services. SFC, and its affiliate, might conduct business relationships with the company that is subject of this report and/ or own its security. This report is based on current public information that we consider reliable, but we do not represent it is accurate or compl ete, and it should not be relied on as such. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information and opinions contained in this report. This report is intended for general information purposes only, and may not be reproduced or redistributed to any other person. This report is not intended as an offer or solicitation with respect to the purchase or sale of any security. This report is not intended to take into account any investment suitability needs of the recipient. In particular, this report is not customized to the specific investment objectives, financial situation, risk appetite or other needs of any person who may receive this report. SFC strongly advises every potential investor to seek professional legal, accounting and financial guidance when determining whether an investment in a security is appropriate to his or her needs. Any investment recommendations contained in this report take into account both risk and expected return. To the maximum extent permitted by applicable law and regulation, SFC shall not be liable for any loss that may arise from the use of this report or its contents or otherwise arising in connection therewith. Any financial projections, fair value estimates and statements regarding future prospects contained in this report may not be realized. All opinions and estimates included in this report constitute SFC’s judgment as of the date of production of this report, and are subject to change without notice. Past performance of any investment is not indicative of future results. The value of securities, the income from them, the prices and currencies of securities, can go down as well as up. An investor may get back less than what he or she originally invested. Additionally, fees may apply on investments in securities. Changes in currency rates may have an adverse effect on the value, price or income of a security. No part of this report may be reproduced without the written permission of SFC. Neither this report nor any copy hereof may be distributed in any jurisdiction outside the Kingdom of Saudi Arabia where its distribution may be restricted by law. Persons who receive this report should make themselves aware of, and adhere to, any such restrictions. By accepting this report, the recipient agrees to be bound by the foregoing limitations.
Saudi Fransi Capital LLC; C.R. 1010231217, P.O Box 23454, Riyadh 11426, Saudi Arabia, Head Office – Riyadh. Authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
CONFIDENTIAL
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
