Did not apply. May be a trading buy since they would be supporting it's price in the near term. Not too sure about it's fundamentals. Does not look like they are managing expenses well with their number of employees ..
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Risk
Domestic economic structure adjustment becomes out of control, and the real estate prices are cut down beyond the expectation;
The prefential policies are cancelled;
The loans demand don`t increase as expected.
Subscribe for ABC because of the rapid growth driven by outstanding operation advantages
As one of large commercial banks, ABC owns the network advantage and widespread customer base. Plus with its leading position and potential to expand in the County Area Banking Business, and the low average cost, and the interest rate hike cycle, its profitability may be improved.
We forecast its operating income of FY10 and FY11 of RMB294.7 billion and RMB366.5 billion; net profit of RMB85.2 billion and RMB111 billion, increase by 31% and 30% y/y respectively; and EPS of RMB0.27 and RMB0.35. The BVPS can get at RMB1.71 and RMB1.96.
The ROAA and ROAE is respectively 0.82% and 18.96% in 2009 for ABC. We choose international banks with the two indicators similar to ABC, their P/E and P/B is respectively 14.45X and 2.1X. Furthermore, tracking historical valuation of other three Large Commercial Banks, their average historical P/E and P/B is respectively 14.45X and 2.26X.
Taking consideration of the sovereign debt crisis,slower GDP growth in the US and Europe, and the strict control policies in China, we conservatively give it 12X P/E to 2010EPS and 2X P/B to 2010BVPS, the 12-m TP of the Company will be HK$3.83 by simple weighted mean. We give it Subscription rating.