2Q15 review: Earnings miss consensus estimate; Maintain Hold
`
Bank AlBilad Banks | 2Q 2015 Preliminary Results | July 8, 2015
2Q15 review: Earnings miss consensus estimate; Maintain Hold
Rating Summary Recommendation
Hold
2Q15 net profit miss consensus estimate: Bank AlBilad has reported 2Q15 net profit of
Target price (SAR)
36.8
SAR207mn (+1.0% yoy, c.+19% qoq) that has missed consensus by c.7%. Net income from
Upside/ (downside)
-3%
investing and financing (‘NIIF’) was SAR287mn (+11% yoy and +5.0% qoq) while the estimated quarterly NIIF Margin (calculated on Average Total Assets) improved a marginal
Stock Details
c.3bps qoq (after contracting 3bps qoq in 1Q15) sequentially to c.2.4%. While no further
Closing price*
details are disclosed at this stage, it seems that the almost flat net profit growth despite a
Market capitalization
c.11% yoy growth in NIIF and c.18% yoy growth in financing portfolio could be attributed to
Shares outstanding
Mn
500
impairments/losses on its investment book, which at c.SAR2.4bn (c.5% of total assets) is
52-Week High
SAR
48.0
52-Week Low
SAR
27.2
%
8.2
down c.32% yoy.
SAR
Price chg. (3 months)
Impressive volume growth, liquidity position has deteriorated: Cues on the volume front
EPS 2015E
continue to remain positive for Al Bilad. The bank’s Net Financing Portfolio (NFP) increased
Ticker (Reuters/ Bloomberg)
18% YoY in 2Q15 (and c.9% qoq), Customer Deposits growth came at a robust 15% YoY
* as of July 7, 2015
(and c.1% qoq). The lacklustre growth in NIIF margin despite healthy uptick in the Net
Key Shareholding (%)
Financing/Customer Deposits ratio, which increased sequentially to c.83% in 2Q15 (1Q
Mohammed Al-Subeaei & Sons Co. Abdullah Ibrahim Al-Subeaei Investment Co. Khaled Abdulrahman Salih Al Rajhi
2015: c.77%), suggests that competitive pressures continue to weigh on loan pricing. Overall, AlBilad’s volume growth compares favourably to that of the system (Assets: +8% yoy, Loans:
38.0
SAR Mn
18,985
SAR
1.5
1140.SE
ALBI AB
18.4% 11.1% 8.9%
+10% yoy, Deposits: +10% yoy, as per SAMA data as of May 2015).As per SAMA data, the group did not add any new branches; net number of ATMs was down by 8; added 2 new remittance services centres and added 199 POS terminals during the first two months of
Valuation (at current price)
2Q15. Valuation is full; trading at a premium to sector; Maintain the Hold rating: AlBilad’s low
2015e
2016e
P/E (x)
25.0
19.6
P/Pre-Provision Profit (x)
18.3
14.7
3.0
2.7
P/B (x)
cost funding base (demand deposits c.77% of total Customer Deposits vs. System: c.65% as at end 1Q 2015) and adequately capitalized balance sheet (Tier I ratio of 15.6% as at end 1Q
Stock price movement vs. TASI
2015) is supporting its aggressive lending strategy and is well reflected in its volume growth numbers. Aggressive pricing on the financing portfolio is the key risk for the stock. Since the
280 260
beginning of 2015, AlBilad shares have gained c.8% YTD vs. KSA Banks index (c.+9%) and TASI (c.+9%), a moderate under performance. The stock currently trades at a 2015E P/B multiple of 3.0x (SFC Est.) which is at a significant premium to KSA/GCC peer group (KSA: 1.3x & GCC: 1.3x). All in all, although we like AlBilad’s growth momentum, we believe at the current price, the positives are largely priced in which leads us to maintain our Hold rating on
240 220
200 180 160 140 120
the stock with an unchanged target price of SAR36.8/share (adjusted for bonus issue).
100
2Q15
Cons*
% Dev
1Q15
% qoq
2Q14
% YoY
Net Inc. from Inv. & Financing
287
na
Na
272
5%
259
11%
Net Profit
207
223
-7%
174
19%
204
1%
Total Assets
49,143
na
Na
46,313
6%
40,978
20%
Net Financing
31,683
na
Na
29,090
9%
26,755
18%
Customer Deposits
38,302
na
Na
37,856
1%
33,354
15%
SAR mn
Sources: Tadawul, Company and Saudi Fransi Capital, *Bloomberg
80 Jan-13
Jul-13
Jan-14 TASI
Jul-14
Jan-15
Jul-15
Al Bilad
Sources: Tadawul and Saudi Fransi Capital analysis
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 AlBilad Banks | 2Q 2015 Preliminary Results | July 8, 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 AlBilad Banks | 2Q 2015 Preliminary Results | July 8, 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 AlBilad Banks | 2Q 2015 Preliminary Results | July 8, 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 AlBilad Banks | 2Q 2015 Preliminary Results | July 8, 2015
2Q15 review: Earnings miss consensus estimate; Maintain Hold
Rating Summary Recommendation
Hold
2Q15 net profit miss consensus estimate: Bank AlBilad has reported 2Q15 net profit of
Target price (SAR)
36.8
SAR207mn (+1.0% yoy, c.+19% qoq) that has missed consensus by c.7%. Net income from
Upside/ (downside)
-3%
investing and financing (‘NIIF’) was SAR287mn (+11% yoy and +5.0% qoq) while the estimated quarterly NIIF Margin (calculated on Average Total Assets) improved a marginal
Stock Details
c.3bps qoq (after contracting 3bps qoq in 1Q15) sequentially to c.2.4%. While no further
Closing price*
details are disclosed at this stage, it seems that the almost flat net profit growth despite a
Market capitalization
c.11% yoy growth in NIIF and c.18% yoy growth in financing portfolio could be attributed to
Shares outstanding
Mn
500
impairments/losses on its investment book, which at c.SAR2.4bn (c.5% of total assets) is
52-Week High
SAR
48.0
52-Week Low
SAR
27.2
%
8.2
down c.32% yoy.
SAR
Price chg. (3 months)
Impressive volume growth, liquidity position has deteriorated: Cues on the volume front
EPS 2015E
continue to remain positive for Al Bilad. The bank’s Net Financing Portfolio (NFP) increased
Ticker (Reuters/ Bloomberg)
18% YoY in 2Q15 (and c.9% qoq), Customer Deposits growth came at a robust 15% YoY
* as of July 7, 2015
(and c.1% qoq). The lacklustre growth in NIIF margin despite healthy uptick in the Net
Key Shareholding (%)
Financing/Customer Deposits ratio, which increased sequentially to c.83% in 2Q15 (1Q
Mohammed Al-Subeaei & Sons Co. Abdullah Ibrahim Al-Subeaei Investment Co. Khaled Abdulrahman Salih Al Rajhi
2015: c.77%), suggests that competitive pressures continue to weigh on loan pricing. Overall, AlBilad’s volume growth compares favourably to that of the system (Assets: +8% yoy, Loans:
38.0
SAR Mn
18,985
SAR
1.5
1140.SE
ALBI AB
18.4% 11.1% 8.9%
+10% yoy, Deposits: +10% yoy, as per SAMA data as of May 2015).As per SAMA data, the group did not add any new branches; net number of ATMs was down by 8; added 2 new remittance services centres and added 199 POS terminals during the first two months of
Valuation (at current price)
2Q15. Valuation is full; trading at a premium to sector; Maintain the Hold rating: AlBilad’s low
2015e
2016e
P/E (x)
25.0
19.6
P/Pre-Provision Profit (x)
18.3
14.7
3.0
2.7
P/B (x)
cost funding base (demand deposits c.77% of total Customer Deposits vs. System: c.65% as at end 1Q 2015) and adequately capitalized balance sheet (Tier I ratio of 15.6% as at end 1Q
Stock price movement vs. TASI
2015) is supporting its aggressive lending strategy and is well reflected in its volume growth numbers. Aggressive pricing on the financing portfolio is the key risk for the stock. Since the
280 260
beginning of 2015, AlBilad shares have gained c.8% YTD vs. KSA Banks index (c.+9%) and TASI (c.+9%), a moderate under performance. The stock currently trades at a 2015E P/B multiple of 3.0x (SFC Est.) which is at a significant premium to KSA/GCC peer group (KSA: 1.3x & GCC: 1.3x). All in all, although we like AlBilad’s growth momentum, we believe at the current price, the positives are largely priced in which leads us to maintain our Hold rating on
240 220
200 180 160 140 120
the stock with an unchanged target price of SAR36.8/share (adjusted for bonus issue).
100
2Q15
Cons*
% Dev
1Q15
% qoq
2Q14
% YoY
Net Inc. from Inv. & Financing
287
na
Na
272
5%
259
11%
Net Profit
207
223
-7%
174
19%
204
1%
Total Assets
49,143
na
Na
46,313
6%
40,978
20%
Net Financing
31,683
na
Na
29,090
9%
26,755
18%
Customer Deposits
38,302
na
Na
37,856
1%
33,354
15%
SAR mn
Sources: Tadawul, Company and Saudi Fransi Capital, *Bloomberg
80 Jan-13
Jul-13
Jan-14 TASI
Jul-14
Jan-15
Jul-15
Al Bilad
Sources: Tadawul and Saudi Fransi Capital analysis
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 AlBilad Banks | 2Q 2015 Preliminary Results | July 8, 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 AlBilad Banks | 2Q 2015 Preliminary Results | July 8, 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 AlBilad Banks | 2Q 2015 Preliminary Results | July 8, 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)
