OVERVIEW:
The household brand is one of the leading financial groups in Asia with over 280 branches across 18 markets. Headquartered in Singapore, it has growing presence in Greater China, Southeast Asia, and South Asia. Singapore government investment company, Temasek Holding is the major shareholder at 30%.
HIGHLIGHTS:
[1] On 2015, its total income crossed $10b mark and net profit hit $4.3b. Both were at record high with 12% year on year. Its cost-income ratio maintained at 45% and net interest margin (NIM) has hit 1.84% in 4Q15 which is highest in five years.
[2] Asset quality is resilient with non performing loan (NPL) maintained at 0.9%. Its capital position is comfortable after factoring in latest Basel 3.5 changes. At 12.4% Core Tier 1 capital, it has the highest capital adequacy level among its peers.
[3] Its CEO, Piyush Gupta estimates that even if oil price were to remain between US$30-40 range for 2016, non performing loans may not be more than $200m.
INVESTMENT THEMES:
[1] Incremental contributions from its bancassurance deal with Canadian insurer Manulife which is estimated to add $250m to profits in 2016. The deal is to capture growing insurance market in Asia.
[2] With the largest saving and current accounts in Singapore, it has the cheapest cost of funds and the biggest beneficiary of rising rates.
[3] Valuation is attractive. Current PB could translate to 2% of non performing loan which is double of current NPL (0.9%)
PRICE TREND:
The counter has been retreating from resistance at 16. Bargain hunting window presents in such correction phase.
*** Note: Same counter has been mentioned in Aug[4] @ 2015 ***
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