Samba Financial Group 20 April 2016 PDF
Samba Financial Group 1Q2016-First Look
Buy
12-Month Target Price SAR 31.00
Deposit Growth Outperforms
April 20, 2016
Expected Total Return Price as on Apr-19, 2016
SAR 20.99
Upside to Target Price
47.7%
Expected Dividend Yield
5.2%
Expected Total Return
52.9%
Market Data 52 Week H/L
SAR 31.00/17.55
Market Capitalization
SAR 41,980 mln
Shares Outstanding
2,000 mln
Free Float
50.27%
12-Month ADTV (000’s)
931.550
TASI Weight
2.81%
Reuters Code
1090.SE
Bloomberg Symbol
SAMBA AB
1-Year Price Performance
Samba Financial Group (Samba) reported 1Q results marginally below expectations with a net income of SAR 1.26 billion (EPS SAR 0.63) as compared to Bloomberg consensus of SAR 1.28 billion. We had forecast an EPS of SAR 0.69. Lower non-core income and higher operating expenses caused the deviation from our estimates. We are pleased with the +4% Q/Q growth in deposits to SAR 178 billion (versus a drop in 4Q). Advances have also grown, albeit at a slower pace at +2% Q/Q resulting in a 150bps decline in LDR to 74.2% at March-end. With a higher provisioning assumption, NPL coverage is expected in excess of 155% by 2016-end. We maintain our SAR 31 target and believe the stock offers an excellent entry point topped with a 5.2% dividend yield. LDR drops to 74.2%
Net special commission income is up +11% Y/Y and +6% Q/Q to SAR 1.25 billion, marginally ahead of our SAR 1.22 billion estimate. +2% Q/Q loan growth to SAR 132 billion combined with higher interest rates has helped push up special commission income. SAIBOR has inclined north of 1.9% from 1.5% at the beginning of the year. Although deposits have risen by +4% Q/Q, structural tilt towards the non-interest bearing portion combined with a lagged interest rate adjustment implies limited rise in special commission expense. Conservative lending means LDR dropped to 74.2% at 1Q-end versus 75.7% at 4Q-end. Many of Samba’s peers have taken advantage of the LDR relaxation to go beyond 85% this quarter. Other income lower than expected
115
Some SAR 671 million in non-core lags our estimate due to a decline in fee-based and trading income, lower both on a Y/Y and Q/Q basis.
105 95
Investments fall -10% Q/Q
85
In line with the sector trend, investments have fallen -10% Q/Q to SAR 63.2 billion and reverses a +7% Q/Q rise in 4Q. It appears Samba has built up cash this quarter given deposit growth not matched by loan growth and a decrease in investments.
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Attractively valued
TBFSI
Source: Bloomberg Samba
TASI
TBFSI
20.99
6,532
14,848
Apr-19, 2016
EPS almost flat Y/Y but down -6% Q/Q to SAR 0.63 may not cheer the market. The stock price has lagged peers in the rally possibly due to perception of less than optimal asset growth. Trading at 1.0x 2016E P/B and offering a 5.2% dividend yield, we recommend a Buy. Key Financials
Total Change (11.8%)
6-months 1-Year
(29.8%)
2-Year
(15.4%)
(15.1%)
(13.1%)
(31.9%)
(30.6%)
(32.2%)
(24.3%)
FY December 31 (SAR mln) Net Comm. Income Provisions for credit losses NIM
(SAR mln)
Actual
RC Forecast
2016E
2017E
2018E
4,663
5,123
5,476
5,804
142
321
339
426
2.1%
2.2%
2.3%
2.3%
30.9%
29.5%
29.0%
28.6%
NPL coverage
181%
155%
138%
140%
ROAA
2.3%
2.3%
2.4%
2.4%
ROAE
13.2%
13.1%
12.8%
12.4%
Cost-to-income 1Q2016
2015A
Net Comm Income
1,252
1,220
CAR
20.1%
18.2%
18.5%
18.7%
Total Op Income
1,923
2,025
EPS (SAR)
2.61
2.75
2.92
3.03
Net Income
1,260
1,385
DPS (SAR)
0.90
1.10
1.20
1.20
20.13
21.84
23.57
25.41
Loans & Advances
132,359
130,500
BVPS
Deposits
178,332
172,250
P/E
8.1x
7.6x
7.2x
6.9x
P/B
1.0x
1.0x
0.9x
0.8x
Muhammad Faisal Potrik [email protected]
+966-11-203-6807
Mansour Al-Ammari
[email protected]
+966-11-203-6815
Riyad Capital is licensed by the Saudi Arabia Capital Markets Authority (No. 07070-37)
Stock Rating
Strong Buy
Buy
Hold
Sell
Not Rated
Expected Total Return ≥ 25%
Expected Total Return ≥ 15%
Expected Total Return < 15%
Overvalued
Under Review/ Restricted
For any feedback on our reports, please contact [email protected]
Disclaimer The information in this report was compiled in good faith from various public sources believed to be reliable. Whilst all reasonable care has been taken to ensure that the facts stated in this report are accurate and that the forecasts, opinions and expectations contained herein are fair and reasonable. Riyad Capital makes no representations or warranties whatsoever as to the accuracy of the data and information provided and, in particular, Riyad Capital does not represent that the information in this report is complete or free from any error. This report is not, and is not to be construed as, an offer to sell or solicitation of an offer to buy any financial securities. Accordingly, no reliance should be placed on the accuracy, fairness or completeness of the information contained in this report. Riyad Capital accepts no liability whatsoever for any loss arising from any use of this report or its contents, and neither Riyad Capital nor any of its respective directors, officers or employees, shall be in any way responsible for the contents hereof. Riyad Capital or its employees or any of its affiliates or clients may have a financial interest in securities or other assets referred to in this report. Opinions, forecasts or projections contained in this report represent Riyad Capital's current opinions or judgment as at the date of this report only and are therefore subject to change without notice. There can be no assurance that future results or events will be consistent with any such opinions, forecasts or projections which represent only one possible outcome. Further, such opinions, forecasts or projections are subject to certain risks, uncertainties and assumptions that have not been verified and future actual results or events could differ materially. The value of, or income from, any investments referred to in this report may fluctuate and/or be affected by changes. Past performance is not necessarily an indicative of future performance. Accordingly, investors may receive back less than originally invested amount. This report provides information of a general nature and does not address the circumstances, objectives, and risk tolerance of any particular investor. Therefore, it is not intended to provide personal investment advice and does not take into account the reader’s financial situation or any specific investment objectives or particular needs which the reader may have. Before making an investment decision the reader should seek advice from an independent financial, legal, tax and/or other required advisers due to the investment in such kind of securities may not be suitable for all recipients. This research report might not be reproduced, nor distributed in whole or in part, and all information, opinions, forecasts and projections contained in it are protected by the copyright rules and regulations.
Riyad Capital is a Saudi limited liability company, with commercial registration number (1010239234), licensed and organized by the Capital Market Authority under License No. (07070-37), and having its registered office at Al Takhassusi Street, Prestige Building, Riyadh, Kingdom of Saudi Arabia (“KSA”). Website: www.riyadcapital.com
Buy
12-Month Target Price SAR 31.00
Deposit Growth Outperforms
April 20, 2016
Expected Total Return Price as on Apr-19, 2016
SAR 20.99
Upside to Target Price
47.7%
Expected Dividend Yield
5.2%
Expected Total Return
52.9%
Market Data 52 Week H/L
SAR 31.00/17.55
Market Capitalization
SAR 41,980 mln
Shares Outstanding
2,000 mln
Free Float
50.27%
12-Month ADTV (000’s)
931.550
TASI Weight
2.81%
Reuters Code
1090.SE
Bloomberg Symbol
SAMBA AB
1-Year Price Performance
Samba Financial Group (Samba) reported 1Q results marginally below expectations with a net income of SAR 1.26 billion (EPS SAR 0.63) as compared to Bloomberg consensus of SAR 1.28 billion. We had forecast an EPS of SAR 0.69. Lower non-core income and higher operating expenses caused the deviation from our estimates. We are pleased with the +4% Q/Q growth in deposits to SAR 178 billion (versus a drop in 4Q). Advances have also grown, albeit at a slower pace at +2% Q/Q resulting in a 150bps decline in LDR to 74.2% at March-end. With a higher provisioning assumption, NPL coverage is expected in excess of 155% by 2016-end. We maintain our SAR 31 target and believe the stock offers an excellent entry point topped with a 5.2% dividend yield. LDR drops to 74.2%
Net special commission income is up +11% Y/Y and +6% Q/Q to SAR 1.25 billion, marginally ahead of our SAR 1.22 billion estimate. +2% Q/Q loan growth to SAR 132 billion combined with higher interest rates has helped push up special commission income. SAIBOR has inclined north of 1.9% from 1.5% at the beginning of the year. Although deposits have risen by +4% Q/Q, structural tilt towards the non-interest bearing portion combined with a lagged interest rate adjustment implies limited rise in special commission expense. Conservative lending means LDR dropped to 74.2% at 1Q-end versus 75.7% at 4Q-end. Many of Samba’s peers have taken advantage of the LDR relaxation to go beyond 85% this quarter. Other income lower than expected
115
Some SAR 671 million in non-core lags our estimate due to a decline in fee-based and trading income, lower both on a Y/Y and Q/Q basis.
105 95
Investments fall -10% Q/Q
85
In line with the sector trend, investments have fallen -10% Q/Q to SAR 63.2 billion and reverses a +7% Q/Q rise in 4Q. It appears Samba has built up cash this quarter given deposit growth not matched by loan growth and a decrease in investments.
75 65
55 A
M
J
J
A
S
O
SAMBA
N
D
J
TASI
F
M
A
Attractively valued
TBFSI
Source: Bloomberg Samba
TASI
TBFSI
20.99
6,532
14,848
Apr-19, 2016
EPS almost flat Y/Y but down -6% Q/Q to SAR 0.63 may not cheer the market. The stock price has lagged peers in the rally possibly due to perception of less than optimal asset growth. Trading at 1.0x 2016E P/B and offering a 5.2% dividend yield, we recommend a Buy. Key Financials
Total Change (11.8%)
6-months 1-Year
(29.8%)
2-Year
(15.4%)
(15.1%)
(13.1%)
(31.9%)
(30.6%)
(32.2%)
(24.3%)
FY December 31 (SAR mln) Net Comm. Income Provisions for credit losses NIM
(SAR mln)
Actual
RC Forecast
2016E
2017E
2018E
4,663
5,123
5,476
5,804
142
321
339
426
2.1%
2.2%
2.3%
2.3%
30.9%
29.5%
29.0%
28.6%
NPL coverage
181%
155%
138%
140%
ROAA
2.3%
2.3%
2.4%
2.4%
ROAE
13.2%
13.1%
12.8%
12.4%
Cost-to-income 1Q2016
2015A
Net Comm Income
1,252
1,220
CAR
20.1%
18.2%
18.5%
18.7%
Total Op Income
1,923
2,025
EPS (SAR)
2.61
2.75
2.92
3.03
Net Income
1,260
1,385
DPS (SAR)
0.90
1.10
1.20
1.20
20.13
21.84
23.57
25.41
Loans & Advances
132,359
130,500
BVPS
Deposits
178,332
172,250
P/E
8.1x
7.6x
7.2x
6.9x
P/B
1.0x
1.0x
0.9x
0.8x
Muhammad Faisal Potrik [email protected]
+966-11-203-6807
Mansour Al-Ammari
[email protected]
+966-11-203-6815
Riyad Capital is licensed by the Saudi Arabia Capital Markets Authority (No. 07070-37)
Stock Rating
Strong Buy
Buy
Hold
Sell
Not Rated
Expected Total Return ≥ 25%
Expected Total Return ≥ 15%
Expected Total Return < 15%
Overvalued
Under Review/ Restricted
For any feedback on our reports, please contact [email protected]
Disclaimer The information in this report was compiled in good faith from various public sources believed to be reliable. Whilst all reasonable care has been taken to ensure that the facts stated in this report are accurate and that the forecasts, opinions and expectations contained herein are fair and reasonable. Riyad Capital makes no representations or warranties whatsoever as to the accuracy of the data and information provided and, in particular, Riyad Capital does not represent that the information in this report is complete or free from any error. This report is not, and is not to be construed as, an offer to sell or solicitation of an offer to buy any financial securities. Accordingly, no reliance should be placed on the accuracy, fairness or completeness of the information contained in this report. Riyad Capital accepts no liability whatsoever for any loss arising from any use of this report or its contents, and neither Riyad Capital nor any of its respective directors, officers or employees, shall be in any way responsible for the contents hereof. Riyad Capital or its employees or any of its affiliates or clients may have a financial interest in securities or other assets referred to in this report. Opinions, forecasts or projections contained in this report represent Riyad Capital's current opinions or judgment as at the date of this report only and are therefore subject to change without notice. There can be no assurance that future results or events will be consistent with any such opinions, forecasts or projections which represent only one possible outcome. Further, such opinions, forecasts or projections are subject to certain risks, uncertainties and assumptions that have not been verified and future actual results or events could differ materially. The value of, or income from, any investments referred to in this report may fluctuate and/or be affected by changes. Past performance is not necessarily an indicative of future performance. Accordingly, investors may receive back less than originally invested amount. This report provides information of a general nature and does not address the circumstances, objectives, and risk tolerance of any particular investor. Therefore, it is not intended to provide personal investment advice and does not take into account the reader’s financial situation or any specific investment objectives or particular needs which the reader may have. Before making an investment decision the reader should seek advice from an independent financial, legal, tax and/or other required advisers due to the investment in such kind of securities may not be suitable for all recipients. This research report might not be reproduced, nor distributed in whole or in part, and all information, opinions, forecasts and projections contained in it are protected by the copyright rules and regulations.
Riyad Capital is a Saudi limited liability company, with commercial registration number (1010239234), licensed and organized by the Capital Market Authority under License No. (07070-37), and having its registered office at Al Takhassusi Street, Prestige Building, Riyadh, Kingdom of Saudi Arabia (“KSA”). Website: www.riyadcapital.com
