2Q15 review: Earnings miss estimate; Maintain Hold - Amazon Web ...
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Bank AlJazira Banks | 2Q 2015 Preliminary Results | July 12, 2015
2Q15 review: Earnings miss estimate; Maintain Hold
Rating Summary
2Q15 net profit miss estimate; One-off gain support earnings: Bank AlJazira reported
Recommendation
Hold
Target price (SAR)
29.3
Upside
3%
2Q15 Net Profit of SAR736mn (+c.224% qoq, +c.341% yoy) which missed consensus estimate by c.9%. The notes accompanying 2Q results indicated that AlJazira had recorded
Stock Details
an extra ordinary income of SAR 573mn resulting from the sale of land. Excluding the impact
Closing price*
of one off, the net profit for 2Q stood at SAR 163mn which is down c.28% qoq (down c.2% yoy). At the operating level, income grew c.8% yoy to SAR 612mn (down +2% qoq) and Net Special Commission Income (NSCI) increased c.13% yoy to SAR403mn (+c.2% qoq).
SAR
28.5
Market capitalization
SAR Mn
Shares outstanding
Mn
400
52-Week High
SAR
39.3
52-Week Low
SAR
25.0
Furthermore, quarterly NSCI margin (calculated on average total assets) is estimated at
Price chg. (YTD)
2.35%, implying a modest 2bps qoq expansion (flat yoy).
EPS 2015E
Volume growth continues to impress; sound liquidity position is a positive: Despite the
Ticker (Reuters/ Bloomberg)
earnings miss, 2Q 2015 results indicate that volume growth at AlJazira continues to remain
* as of July 9, 2015
11,392
%
2.5
SAR
1.84
1020.SE
BJAZ AB
healthy. Total assets grew c.12% yoy whereas net financing portfolio and customer deposits both registered a healthy c.15% yoy growth in 2Q15 (vs. system assets/loans/deposits c.8%/10%/10% yoy, as per latest SAMA data as of May 2015). The Net Financing to Customer Deposit ratio stood at c.75% in 2Q 2015 (vs. 1Q15 c.74%), however capital adequacy may be a short term impediment to further growth (CAGR 2014-18E: c.+12%). As per SAMA data, AlJazira added 44 new ATMs (c.17% market share in new additions),
Key Shareholding (%) Union Brothers for Development Co.
6.6%
The National Bank of Pakistan
5.8%
Saleh Abdullah Mohamed Kamel
5.0%
opened 5 new remittance services centers and added 305 Point Of Sale (PoS) terminals
Valuation (at current price)
during the first two months of 2Q15. Further improvement of the cost structure is key to the equity story; Maintain Hold: Bank AlJazira has the lowest NSCI margin (2.35%) amongst the peer group of the ‘pure play’
2015E
2016E
P/E (x)
15.5
12.7
P/Pre-Provision Profit (x)
10.2
8.6
1.7
1.6
P/B (x)
Islamic banks (2Q 2015: Al Bilad: 2.40%; Alinma: 2.95% and Al Rajhi: 3.11%), 2Q results indicated only a moderate 2bps margin expansion sequentially (flat yoy). However, while low capitalization level (Tier I capital 1Q15: c.12%) along with high-cost funding base (demand
Stock price movement vs. TASI 220
deposits c.47% of total customer deposits in 1Q15 (vs. c.65% for the system) are key
200
concerns, streamlining its cost structure (cost to income 1Q 2015: 57.6% vs. Al Rajhi 40.4%,
180
Alinma 42.8% and AlBilad 58.5%) holds the key to long term equity story for AlJazira. On a
160
year-to-date basis, AlJazira shares has underperformed c.+3% (KSA Banks index c.+12%,
140
TASI c.+11%) and the stock trades at 2015E P/B of 1.7x (SFC est), which is at a moderate
120
premium to KSA/GCC Bank peers (KSA: 1.4x & GCC: 1.4x). All in all, post publication of 2Q
100
results, we maintain Hold rating on the stock with an unchanged target price of SAR29.3/share.
Jul-13
Jan-14 TASI
2Q15
Cons*
% Dev
1Q15
% Qoq
2Q14
% Yoy
Net Special Commission Income (NSCI)
403
na
na
396
2%
356
13%
Net Profit
736
813
-9%
227
224%
167
341%
Net Profit (ex-one off)
163
na
na
227
-28%
167
-2%
Total Assets
67,630
na
na
69,373
-3%
60,641
12%
Net Financing
42,132
na
na
40,873
3%
36,683
15%
Customer Deposits
55,882
na
na
55,420
1%
48,468
15%
SAR mn
80 Jan-13
Jul-14
Jan-15
Jul-15
Bank Al Jazira
Sources: Tadawul and Saudi Fransi Capital
Sector Coverage Dipanjan Ray [email protected] +966-1-12826861 AbdulAziz Jawdat [email protected] +966-11-2826856
Sources: Company, Tadawul, Bloomberg and Saudi Fransi Capital
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 | 2Q 2015 Preliminary Results | July 12, 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 | 2Q 2015 Preliminary Results | July 12, 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 | 2Q 2015 Preliminary Results | July 12, 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 c ompany 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 stat ements 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 | 2Q 2015 Preliminary Results | July 12, 2015
2Q15 review: Earnings miss estimate; Maintain Hold
Rating Summary
2Q15 net profit miss estimate; One-off gain support earnings: Bank AlJazira reported
Recommendation
Hold
Target price (SAR)
29.3
Upside
3%
2Q15 Net Profit of SAR736mn (+c.224% qoq, +c.341% yoy) which missed consensus estimate by c.9%. The notes accompanying 2Q results indicated that AlJazira had recorded
Stock Details
an extra ordinary income of SAR 573mn resulting from the sale of land. Excluding the impact
Closing price*
of one off, the net profit for 2Q stood at SAR 163mn which is down c.28% qoq (down c.2% yoy). At the operating level, income grew c.8% yoy to SAR 612mn (down +2% qoq) and Net Special Commission Income (NSCI) increased c.13% yoy to SAR403mn (+c.2% qoq).
SAR
28.5
Market capitalization
SAR Mn
Shares outstanding
Mn
400
52-Week High
SAR
39.3
52-Week Low
SAR
25.0
Furthermore, quarterly NSCI margin (calculated on average total assets) is estimated at
Price chg. (YTD)
2.35%, implying a modest 2bps qoq expansion (flat yoy).
EPS 2015E
Volume growth continues to impress; sound liquidity position is a positive: Despite the
Ticker (Reuters/ Bloomberg)
earnings miss, 2Q 2015 results indicate that volume growth at AlJazira continues to remain
* as of July 9, 2015
11,392
%
2.5
SAR
1.84
1020.SE
BJAZ AB
healthy. Total assets grew c.12% yoy whereas net financing portfolio and customer deposits both registered a healthy c.15% yoy growth in 2Q15 (vs. system assets/loans/deposits c.8%/10%/10% yoy, as per latest SAMA data as of May 2015). The Net Financing to Customer Deposit ratio stood at c.75% in 2Q 2015 (vs. 1Q15 c.74%), however capital adequacy may be a short term impediment to further growth (CAGR 2014-18E: c.+12%). As per SAMA data, AlJazira added 44 new ATMs (c.17% market share in new additions),
Key Shareholding (%) Union Brothers for Development Co.
6.6%
The National Bank of Pakistan
5.8%
Saleh Abdullah Mohamed Kamel
5.0%
opened 5 new remittance services centers and added 305 Point Of Sale (PoS) terminals
Valuation (at current price)
during the first two months of 2Q15. Further improvement of the cost structure is key to the equity story; Maintain Hold: Bank AlJazira has the lowest NSCI margin (2.35%) amongst the peer group of the ‘pure play’
2015E
2016E
P/E (x)
15.5
12.7
P/Pre-Provision Profit (x)
10.2
8.6
1.7
1.6
P/B (x)
Islamic banks (2Q 2015: Al Bilad: 2.40%; Alinma: 2.95% and Al Rajhi: 3.11%), 2Q results indicated only a moderate 2bps margin expansion sequentially (flat yoy). However, while low capitalization level (Tier I capital 1Q15: c.12%) along with high-cost funding base (demand
Stock price movement vs. TASI 220
deposits c.47% of total customer deposits in 1Q15 (vs. c.65% for the system) are key
200
concerns, streamlining its cost structure (cost to income 1Q 2015: 57.6% vs. Al Rajhi 40.4%,
180
Alinma 42.8% and AlBilad 58.5%) holds the key to long term equity story for AlJazira. On a
160
year-to-date basis, AlJazira shares has underperformed c.+3% (KSA Banks index c.+12%,
140
TASI c.+11%) and the stock trades at 2015E P/B of 1.7x (SFC est), which is at a moderate
120
premium to KSA/GCC Bank peers (KSA: 1.4x & GCC: 1.4x). All in all, post publication of 2Q
100
results, we maintain Hold rating on the stock with an unchanged target price of SAR29.3/share.
Jul-13
Jan-14 TASI
2Q15
Cons*
% Dev
1Q15
% Qoq
2Q14
% Yoy
Net Special Commission Income (NSCI)
403
na
na
396
2%
356
13%
Net Profit
736
813
-9%
227
224%
167
341%
Net Profit (ex-one off)
163
na
na
227
-28%
167
-2%
Total Assets
67,630
na
na
69,373
-3%
60,641
12%
Net Financing
42,132
na
na
40,873
3%
36,683
15%
Customer Deposits
55,882
na
na
55,420
1%
48,468
15%
SAR mn
80 Jan-13
Jul-14
Jan-15
Jul-15
Bank Al Jazira
Sources: Tadawul and Saudi Fransi Capital
Sector Coverage Dipanjan Ray [email protected] +966-1-12826861 AbdulAziz Jawdat [email protected] +966-11-2826856
Sources: Company, Tadawul, Bloomberg and Saudi Fransi Capital
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 | 2Q 2015 Preliminary Results | July 12, 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 | 2Q 2015 Preliminary Results | July 12, 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 | 2Q 2015 Preliminary Results | July 12, 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 c ompany 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 stat ements 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)
