STB_Company Update_Valuation is stretched
22/02/2021 - 08:06
TP upside (downside) -4%
Close 08 Feb 2021
Price VND 17,400
12M Target VND 16,790
Previous Target VND 12,950
- We increase our target price on a reduced discount rate and boosted earnings forecasts.
- We raise our earnings forecasts by 13% for 2021E and 12% for 2022E.
- Loan growth revised up by 70bps to 13.2% for 2021E.
- Valuation is stretched – downgrade to HOLD-Underperform.
- Nonperforming asset resolution is still key for this turnaround story
- STB trades at 1.0x 2021E P/BV vs. peer median of 1.3x despite a low 2021E ROE of 9.8% vs. the sector average of 17.0%.
Valuation is stretched
We increase our PATMI forecasts by 13% for 2021E and 12% for 2022E as the net result of higher revenues offset by higher expenses. We now expect PATMI to increase by +34% YoY in 2021E and +22% YoY in 2022E.
We increase our loans growth forecast by 70bps to 13.2% YoY.
NIM forecasts increased by 61bps vs. our previous forecast to 3.16% for 2021E (+40bps YoY). Easy monetary policy will likely persist in 2021, which should support NIM based on lower funding costs.
We increase our fee income forecasts by 3% for 2021E to reach VND4.6 tn in 2021E.
Operating expenses forecast raised by 15% vs. our previous forecast for 2021E.
We also increase our 2021E provisioning assumption by 19% vs our previous forecast to reach VND3.6 tn.
Yuanta vs. consensus. Our increased PATMI forecasts are 11% above the consensus mean for 2021E and 2% higher for 2022E.
Downgrade to HOLD-Underperform on valuation. We continue to view STB as a turnaround play for the long haul. A controlled pandemic and real estate recovery in 2021 should help to accelerate the progress of resolving the legacy non-performing assets. However, the market may have gotten unsustainably excited by M&A chatter, and we can’t recommend chasing the stock at these levels.
STB is trading at 1.0x 2021E P/BV vs. peers’ median of 1.3x, but this must be set against its low adjusted 2021E ROE of 9.8% vs the sector average of 17%. As such, we downgrade the stock to HOLD-Underperform from our previous BUY rating.
For the complete report, please access here: STB_Company Update_Feb 2021
Analyst: Tanh Tran, firstname.lastname@example.org