MBB [M-PF +0.7%]

30 thg 9, 2015

MBB [M-PF +0.7%]


MBB [M-PF +0.7%] - Forecast struggles against gust of dilution - Update
Military Bank (MBB), Military Commercial JS Bank

Price: VND 15,000                 Target Price: 14,100              Upside: -6.0% (+0.7% div)
Market Cap: USD 1,066m (*)  Daily Val 30 Day: USD 1,4m  Foreign room (*): 2.5%

(*): pro forma
    Key Metrics
2013A
2014A
2015F
2016F
    Pre-Provision profit
4,914
5,193
5,554
5,965
    NPAT less Minority Interest Margin %
2,276
2,476
2,485
2,486
    Pre-Provision profit growth
-4.0%
5.7%
7.0%
7.4%
    NPAT growth
-1.3%
8.8%
0.4%
0.0%
    EPS growth (*)
-11.5%
6.3%
-7.6%
-20.6%
    PER at market price
7.5
7.1
7.7
9.7
    PBR at market price
1.2
1.1
1.1
1.1
    ROE
16.2%
15.6%
13.0%
11.2%
    Dividend Yield at market price
4.7%
6.7%
6.7%
6.0%
    NPL
2.4%
2.8%
2.3%
2.4%
    CAR
11.0%
10.1%
12.0%
11.2%
Notes: (*) EPS growth is calculated based on earnings normalized to exclude extraordinary profits and adjusted for provisions for employee bonus funds per Circular 200. EPS has been diluted for 2015 3% stock dividend.

* Wednesday’s opening of MBB’s foreign ROOM signifies imminent settlement of the 406m share domestic placement and we accordingly update our valuation. Significant dilution forces us to be more generous across the board in terms of forecast assumptions with the exception of holding our NIMs assumptions constant relative to our 7th Sept 2015 report.
* Summary of assumption changes are:

 * Credit cost lowered across 5 year forecast period, drops ranging from 8bps in FY15 to 5bps drop in terminal year (relative to total customer loan book). Terminal year assumption is 84bps;
  * Credit growth in customer loan book moves up from 15.7% to 18.8% in FY15 and subsequent years are moved up too to eventually reach 15.9% in terminal year. YE CAR moves up to 12.0% from previous estimate of 10.5%.
  * Operating expenses drops from 34.4% to 32.1% in terminal year (cf VCB which is modelled on 30.3% in its terminal year).
  * Foreign strategic investor is modelled to happen in 2017 at 10% dilution and VND13,000 per share offering price.
  * Target P/B (25% weighting) is moved up from 1.0x to 1.6x.
* Despite these aerial barrel rolls in assumptions our TP comes down from VND14,700 to VND14,100. Our FY15 PBT forecast edges up to VND3,186b vs start of year guidance of circa VND3,250b. At a closing price of VND 15,000, MBB is trading at FY15 forward P/E of 7.7x and FY15 forward P/B of 1.1x. The low P/B ratio compared to other banks comes about because of the inability of our residual income model to attain a high price given the high credit cost we impose during the forecast period (even after the haircut) and significant share dilution.

VCSC