SINGAPORE (Mar 5): OCBC Investment Research is maintaining its “buy” call on UOB while raising its fair value estimate to $30.86 from $30.10 previously, after adjusting its estimates and using the same valuation of 13 times FY18 book.
The research house also suggests that a $1 dividend payout is likely for UOB investors for FY18, considering the bank’s positive earnings momentum and favourable operating outlook.
In a Monday report, lead analyst Carmen Lee deems the bank’s latest quarterly financials an overall good set of results, with $855 million in 4Q earnings boosting its full year earnings to $3.39 billion, which is in line with OCBC’s expectations.
Given favourable operating conditions and four rate hikes to be expected this year under the watch of the new US Federal Reserve chairman Jerome Powell, OCBC has revised its FY18 earnings forecast for UOB upwards to $3.841 billion from $3.8 billion previously to represent a 13% improvement over 2017.
“We believe this is achievable on the back of better Net Interest Income and Net Trading Income expected for 2018. In addition, we believe that a $1 dividend payout is also likely in FY18, which works out to a payout ratio of about 43% (versus 49% in FY17). UOB has done well so far this year – up 6% YTD,” says Lee.
“Based on the latest International Monetary Fund’s projection (Jan 2018), global growth is estimated at 3.7% in 2017, with the momentum continuing into 2018 at 3.9% and 2019 at 3.9% as well. We believe this will continue to be constructive for Singapore’s banking sector,” she adds.
As at 4.40pm, shares in UOB are trading 20 cents lower at $27.55 or 11.91 times FY18 earnings.
