Published: Wednesday August 29, 2012 MYT 9:06:00 AM
HDBSVR maintains Buy on HL Bank, ups TP to RM17
It said on Wednesday its target price was based on the Gordon Growth Model (16% return on equity; 5% growth and 10% cost of equity) and implies 2.3 times CY13 book value.
“Weaker 4Q12 profit. This was due to lower non-interest income (forex and hedging losses), and higher expenses and provisions,” it said.
HDBSVR said HL Bank reaped RM200mil synergies in FY12 versus targeted RM180mil largely led by cost savings (RM112mil in personnel expenses, RM46mil in admin/ general/IT expenses).
“Its RM42mil revenue synergies came from cross-selling of treasury products, higher asset yields (from EON) and higher fee charges,” it said.
HDBSVR said the higher dividend per share (DPS) was sustainable. The 27 sen final DPS takes full year DPS to 38sen (32% net payout).
“We believe the higher absolute dividends are here to stay. HL Bank has about RM900mil tax credit but has not decided whether to frank dividends by end 2013,” it said.