UOB is RHB's top pick when it comes to local banks

UOB is RHB's top pick when it comes to local banks

By: 
PC Lee
22/02/19, 05:35 pm

SINGAPORE (Feb 22): United Overseas Bank is the top pick for Singapore banks, says RHB Research which believes the share price weakness after the results release offers a good entry point.

UOB has also declared a final dividend of 50 cents per share and special dividend of 20 cents per share. FY2018 total dividend of $1.20 gives an attractive yield of 4.6%.

Rising 18% y-o-y, UOB’s FY2018 earnings of $4.01 billion came in line with RHB’s forecast of $4.16 billion and consensus’ forecast of $4.05 billion.

For FY2019, management has guided for net interest margin (NIM) to be flattish y-o-y, with an upward bias.

As loans are repriced with a lag of about three months, UOB says home mortgage upwards repricing should help raise asset yields.

“We forecast 2019 NIM of 1.84%, vs 2018’s 1.82%,” says analyst Leng Seng Choon in a Friday report.

Management has also guided for mid single-digit FY2019 loan growth.

4Q18 loans expanded 11% y-o-y and 3% q-o-q, driving up NII (net interest income) but drawdown was muted after the property cooling measures of July 2018.

Management guided for fees to expand by mid single-digits in 2019.

Cost income ratio (CIR) is expected to remain at 44% in the near term.

“While we believe CIR will improve across all banks over the longer term, as digitisation efforts lower costs, management guided for 44% in the near term,” says Leng.

“Maintain ‘buy’ with unchanged target price of $29.80 – pegged to 2019F P/BV of 1.35x,” says Leng.

“Our long-term ROE assumption is 12.9%. This is higher than UOB’s 2018 ROE of 11.3%, and management guidance for 2019 ROE of 12%.”

Shares in UOB closed 40 cents lower at $25.58 on Friday.

Living it up

SINGAPORE (Mar 25): This is the season for indices. On March 20, Singapore was ranked 34th in the World Happiness Index — less happy than Taiwan, but far more cheery than Hong Kong and China, as well as its neighbours, Thailand, Malaysia and Indonesia. Globally, the Scandinavian and north European cities top the index; and New Zealand, Canada and Austria round out the top 10. The index this year focuses on happiness and the community, taking into account how happiness has evolved over the years, as affected by technology, social norms, conflicts and government policies. A week earlier, th....
Read More >>

The charismatic bankrupt who allegedly pulled the strings behind Singapore's largest stock manipulation scandal

SINGAPORE (Mar 26): Garbed in purple overalls, John Soh Chee Wen cuts a relaxed figure as he takes his seat. The garment falls fittingly on his athletic frame, not unlike a designer suit. It could well have made a fashion statement, save for the word "prisoner" emblazoned in white across the back. As his legal team huddled around him before the start of the trial, the 60-year-old is a picture of calm. At one point, he casually flashes a thumbs up at his lead counsel, N Sreenivasan, a managing director and senior counsel at Straits Law LLP. Then, as he turns back to his seat in the dock, ....
Read More >>

OCBC still bullish on banking stocks after a lacklustre FY18

SINGAPORE (Mar 26): OCBC Investment Research remains bullish on Singapore’s banking space while keeping its sector “overweight” with “buy” calls on both DBS and UOB, which have been given fair value estimates of $29.31 and $28.30, respectively. Both stocks had dividend yields of 4.8%, with DBS and UOB trading at the respective book values of 1.3 times and 1.1 times, or at an average of 1.2 times historical book as at the close of Wednesday. In a Tuesday report, OCBC analyst Carmen Lee notes that raising this average to 1.3 times book and factoring a 10% premium for DBS over the....
Read More >>