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Union National Bank - Q2 2010 Results Note
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UNION NATIONAL BANK (UNB.AD) Q2 2010 RESULTS NOTE
KEY HIGHLIGHTS:
LENDING RECOVERY BOOSTED TOP LINE, YET HIGHER THAN EXPECTED PROVISIONING DRAGGED DOWN Q2 10 NET PROFIT 11% QOQ TO AED 337MN: Union National Bank (UNB) disclosed this morning its interim bottom line of AED 337mn implying an 11% QoQ drop yet a 15% YoY increase over Q2 09 ‘clean’ figure of AED 292mn (excluding investment property gains). Even though balance sheet growth came stronger than expected, which positively impacted the top line; the sequential 36% expansion in provision charges pressured the quarter’s net profit which eventually came 14% short of our AED 392mn estimate. Over H1 10, UNB achieved net earnings of AED 717mn, up 13.9% YoY over ‘clean’ H1 09 figure of AED 629mn.
SEQUENTIAL DROP IN EARNINGS NOT INDICATIVE OF STRONG UNDERLYING FUNDAMENTALS: In spite of the drop in profitability during Q2 10, UNB reported robust balance sheet growth and impressive asset quality indicators along side a highly comfortable CAR of 20.9% at June-end 10. Based on annualized H1 10 net profit, ROAE is currently standing at 16.2%, inline with ‘clean’ FY 09 returns of 16.0%. In our view, UNB should be able to maintain its positive balance sheet activity in H2 10, yet likely at a lower pace. However coupled with easing provisioning efforts, this should reflect positively on the bank’s bottom-line (this is validated by the management’s optimism for H2 10). Based on today’s closing price of AED 2.99 per share, the bank is trading at a H1 10 P/B multiple as low as 0.6x, an unwarranted discount in our view to the UAE banks’ average of 1.1x.
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Union National Bank - Q2 2010 Results Note |
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Commercial Bank of Qatar - Q2 2010 Results Note
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COMMERCIAL BANK OF QATAR (COMB.QA) Q2 2010 RESULTS NOTE
KEY HIGHLIGHTS:
Q2 10 NET PROFIT OF QAR 408MN, 12% ABOVE ESTIMATES ON LENDING RECOVERY: Commercial Bank of Qatar (CBQ) reported Q2 10 net earnings of QAR 408mn (almost flat QoQ, up 23% YoY), 12% higher than our quarter’s estimate of QAR 363mn. Contrary to expectations and despite delayed private sector lending recovery in Qatar, the bank managed in Q2 10 to channel significant new business as evident through the strong balance sheet growth which, in turn, reflected positively on the top line. Over H1 10, the bank has accumulated net profits of QAR 818.3mn, up 5% from a “clean” H1 09 figure of QAR 778.3mn (excluding QAR 165mn property gains booked in Q1 09). At these levels, the bank already achieved 51% of our 2010 net profit target of QAR 1,593mn.
LENDING RECOVERY DEEMS UPWARD REVISION OF OUR FORECASTS; BUY RATING MAINTAINED: CBQ's stronger than expected operating performance in Q2 10 stemmed from the recovery of its lending business as the bank was able to capture public sector deals to alleviate delayed recovery in domestic private sector lending. This, combined with better than expected asset quality metrics, deem, in our view, the upward revision of our forecasts for the bank. After rallying 2.7% today post Q2 10 results' disclosure, CBQ is trading at a discount to immediate peers with H1 10 PB of 1.4x. We reiterate our BUY rating on the name.
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Commercial Bank of Qatar - Q2 2010 Results Note |
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First Gulf Bank - Q2 2010 Results Note
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FIRST GULF BANK (FGB.AD) Q2 2010 RESULTS NOTE
KEY HIGHLIGHTS:
Q2 10 NET PROFIT OF AED 787MN PERFECTLY IN LINE WITH OUR ESTIMATES, YET FALLING 9% SHORT OF CONSENSUS AVERAGE: First Gulf Bank (FGB) reported Q2 10 net earnings of AED 787mn, up 2% YoY and 6% from a “clean” Q1 10 figure of AED 741mn. These results came straight inline with our estimate of AED 794mn, yet 9% below Reuters consensus average of AED 866mn. Despite slower than expected balance sheet growth, the bank’s top line matched our forecasts and ended almost flat QoQ. All in all, FGB generated “clean” H1 10 net earnings of AED 1,528mn, up a mere 0.2% from AED 1,526mn in H1 09.
GOOD PERFORMANCE OVERALL; YET SHARE PRICE MIGHT REFLECT SOME DISAPPOINTMENT IN THE SHORT-TERM: FGB achieved a good performance in Q2 10 in spite of difficult operating conditions. However, interim bottom line came below market expectations which, in our view, could negatively reflect on the share price movement in the coming sessions. We believe the stock is attractive at current levels with H1 10 PB of 1.1x, based on today's closing price per share of AED 14.45.
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First Gulf Bank - Q2 2010 Results Note |
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Sorouh Real Estate - Q2 2010 First Reaction
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Sorouh Real Estate (SOR.AD) Q2 10 FIRST REACTION NOTE:
KEY HIGHLIGHTS:
Q2 10 net profits reach AED 31mn, 29% below consensus: Sorouh Real Estate (Sorouh) reported Q2 10 net profits of AED 31mn, 29% below the Reuters consensus of AED 44mn. Net profit is down close to 80% both YoY and QoQ, mainly on the absence of land sales and fewer property handovers. The net profit margin landed on 16.2%, losing a significant 14 percentage points QoQ.
Outlook: Moving into H2 10, Sorouh is expected to witness a spike in unit deliveries from Sun and Sky towers and consequently ‘accounting’ revenues and profits. Rental income is also expected to pick up as the investment property portfolio sees the addition of the retail space within these towers. Nevertheless, these recurring revenues from investment properties will stay limited. Consequently, Sorouh remains an option on the potential recovery of the Abu Dhabi real estate market rather than a value play founded on the premise of operating performance. As a result, we continue to believe that the P/B premium Sorouh is trading at relative to Emaar Properties is unwarranted, especially given the latter’s more sizeable investment property portfolio, higher yields, stronger earnings visibility and diversified emerging market access. While we note that this premium has declined from 37% in January 2010 to 11% now, in our view, Sorouh should trade at a discount to Emaar.
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Sorouh Real Estate - Q2 2010 First Reaction |
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Saudi Telecom Company - Q2 2010 Results Note: Expect material downward revision to consensus earnings
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Saudi telecom company (7010.SE) Q2 2010 ResulTs note
Key Highlights:
Bottom line boosted by other income of SAR 369mn, confirming our initial view of a favourable item below the operating profit line: STC reported earlier Q2 10 net profit of SAR 2,062mn which beat our (albeit conservative) estimate of SAR 1,831mn, and came in line with street consensus of SAR 2.0bn. The financial statements reveal that STC met Q2 10 consensus net profit estimate with a little help from an unusually high other income of SAR 369mn – confirming our view in the First Reaction note. In addition, for H1 10 the company recorded only SAR 2mn in early retirement expense compared to SAR 444mn in H1 09. Management indicated that costs related to this program will be incurred in the second half of 2010. Q2 10 results were not distorted by FX items, with a negligible FX loss of SAR 10mn.
Expect material downward revision to current 2010 consensus profit estimate of SAR 4.60 / share: In light of H1 10 results, we expect a material downward revision in analysts’ forecasts. 2010 consensus net profit estimate is currently at SAR 9.26bn or SAR 4.60 / share. Factoring SAR 400mn in early retirement expense in H2 10, our back of the envelope calculations imply a 2010 EBITDA and net profit estimates of SAR 18.2bn and c. SAR 3.50 / share, respectively. To highlight the significant deterioration in STC’s earning power, in December 2009 we had pencilled a 2010 EPS forecast of SAR 5.42 per share (consensus was SAR 6.03 / share at that time).
Based on our preliminary revised estimates, valuation does not look cheap: the shares are currently trading at 4.6x EV / 2010E pre-tax adjusted EBITDA (5.6x EV / reported EBITDA) and a P/E of 11.1x, compared to 4.3x EV/EBITDA and 9.5x P/E for regional peers, and versus Mobily trading at an EV / 2010E pre-tax EBITDA of 6.5x and a P/E of 10.3x, which we expect to deliver double digit earnings growth.
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Saudi Telecom Company - Q2 2010 Results Note: Expect material downward revision to consensus earnings |
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