20140214-Maybank_KERPL-Lifted_by_lower_taxes_11页_717kb

United Overseas Bank (UOB) Summary

Core Information

• Share Price: SGD19.90
• Target Price: SGD23.60 (+18.6%)
• Market Cap (USD): 24.8B
• Average Daily Trading Volume (USD): 27M
• Location: Singapore
• Sector: Banks
• Investment Recommendation: BUY
• Free Float (%): 70.0
• Issued Shares (m): 1,578
• Market Capitalization (SGD): SGD31.4B
• Major Shareholders:
  • Wee Family: 18%
  • Lien Family: 5%

Key Performance Highlights

• 4Q13 Core PATMI: SGD773m (+5.9% QoQ, +11.1% YoY), beating estimates due to lower taxation.
• NIM: Improved to 1.74% in 4Q13, with a 3bps QoQ increase, outperforming DBS and OCBC.
• Loan Growth: 3.4% QoQ or 18.2% YoY, driven by regional markets (+7.0%, +16.8%) and Singapore (+2.2%, +17.7%).
• Asset Quality: NPL ratio at 1.1%, the best in over 16 years.
• Cost/Income Ratio: Maintained at 43.5%, up from 42.4% in 2012.
• ROAE: 12.4% for FY14E, showing improvement in profitability.
• ROAA: 1.1% for FY14E, consistent with previous years.

Financial Forecast and Valuation

• Core EPS (FY14E): SGD1.8
• Core P/E (x): 11.3 (based on FY14E core EPS)
• Target Price (SGD23.60): Based on 13x FY14E core EPS, consistent with rolling P/E mean since 2005.
• Core Net Profit (FY14E): SGD2,786.6m
• Projected Core Net Profit Growth:
  • FY14E: +12.3%
  • FY15E: +23.5%
• Dividend Yield: Expected to increase to 3.8% by FY16E.
• Book Value (SGD): Projected to reach SGD20.65 by FY16E.
• P/BV (x): Expected to trend down to 1.0 by FY16E.

Key Trends and Performance Metrics

• Net Interest Income (4Q13): SGD1,095m (+4.7% QoQ, +13.4% YoY), supported by NIM improvement and loan growth.
• Non-Interest Income (4Q13): SGD648m (+12.1% QoQ, +3.5% YoY), with strong fee and commission growth.
• Operating Income (4Q13): SGD1,743m (+7.3% QoQ, +9.5% YoY).
• Overhead Expenses (4Q13): SGD762m, up due to higher staff and business-related costs.
• Pre-Provision Profit (4Q13): SGD981m (+7.9% QoQ, +12.2% YoY).
• Provisions (4Q13): SGD138m, with a QoQ jump due to higher individual impairment.
• Operating Profit (4Q13): SGD843m (+16.4% YoY).
• Pretax Profit (4Q13): SGD857m (+15.7% YoY).
• Tax: SGD78m, leading to a 9.1% effective tax rate.
• Reported Net Profit (4Q13): SGD773m (+11.1% YoY).

Full-Year Performance (FY12A - FY13A)

• Net Interest Income: SGD4,120.0m (+5.2% YoY), with a 15bps contraction in NIM.
• Non-Interest Income: SGD2,562.0m, with a slight YoY decline.
• Operating Income: SGD6,682.0m (+2.9% YoY).
• Overhead Expenses: SGD2,899.0m (+5.6% YoY).
• Pre-Provision Profit: SGD3,783.0m (+2.2% YoY).
• Provisions: SGD428.0m, with a YoY decline due to lower individual impairment.
• Operating Profit: SGD3,355.0m (+2.7% YoY).
• Pretax Profit: SGD3,466.0m (+3.4% YoY).
• Tax: SGD559.0m, leading to a 16.1% effective tax rate.
• Reported Net Profit: SGD3,010.0m (+7.3% YoY).

Ratio Analysis (FYE Dec)

• Net Interest Margin: Improved to 1.74% in 4Q13, with a QoQ increase larger than peers.
• Provision Coverage: Strong ratio at 145.0%, indicating resilience in asset quality.
• Liquidity: Loan-deposit ratio at 88.5%, showing a trend of higher liquidity.
• Capital Adequacy: Risk-weighted capital at 16.0%, maintaining a healthy level.
• ROAE: 12.4% for FY14E, reflecting strong profitability.
• ROAA: 1.1% for FY14E, showing stable returns on assets.

Share Price Performance

• 1-Month Return: 2.3%
• 3-Month Return: 0.5%
• 12-Month Return: 9.2%
• Relative to Country: 11.1% over 12 months.

Key Metrics (FYE Dec)

• Core P/E (x): 11.3 for FY14E
• Core FD P/E (x): 11.3 for FY14E
• P/BV (x): 1.1 for FY14E
• P/NTA (x): 1.3 for FY14E
• Net Dividend Yield (%): Expected to reach 3.8% by FY16E

Research Offices

• Singapore:

  • NG Wee Siang (Head of Research)
  • Gregory YAP
  • Wilson LIEW
  • ONG Kian Lin
  • James KOH
  • YEAK Chee Keong
  • Derrick HENG
  • WEI Bin
  • John CHEONG

• Malaysia:

  • WONG Chew Hann (CA Head of Research)
  • Desmond CH'NG (Banking & Finance)
  • LIAW Thong Jung (Oil & Gas - Regional • Shipping)
  • ONG Chee Ting (Plantations - Regional)
  • Mohsin AZIZ (- Aviation - Petrochem)
  • YIN Shao Yang (Gaming - Regional Media)
  • LEE Cheng Hooi (Regional Chartist)
  • Tee Sze Chiah (Head of Retail Research)

• Hong Kong / China:

  • Howard WONG (Head of Research)
  • Alexander LATZER (Oil & Gas - Regional)
  • Jacqueline KO (Consumer)
  • Karen KWAN (- Property & REITs)
  • Osbert TANG (Transport & Industrials)
  • Philip TSE (Property & REITs)
  • Ricky WK NG (Utilities & Renewable Energy)
  • Simon QIAN (Telecom & Internet)
  • Steven ST CHAN (Banking & Financials)
  • Warren LAU (Technology - Regional)

• India:

  • Jiqar SHAH (Head of Research)
  • Anubhav GUPTA (Metal & Mining Capital Goods Property)
  • Urmil SHAH (- Technology - Media)

• Indonesia:

  • Wilianto IE (Head of Research)
  • Rahmi MARINA (Banking & Finance)
  • Aurelia SETIABUDI (- Property)
  • Anthony YUNUS (- Consumer - Poultry)
  • Isnaputra ISKANDAR (- Metals & Mining - Cement)
  • Pandu ANUGRAH (- Infrastructure • Construction • Transport)
  • Janni ASMAN (Cigarette • Healthcare • Retail)

• Philippines:

  • Luz LORENZO (Head of Research)
  • Laura DY-LIACCO (Strategy)
  • LoveII SARREAL (Consumer Media Cement)
  • Rommel RODRIGO (- Conglomerates • Property • Gaming)
  • Katherine TAN (- Ports/Logistics)