What is the news?
Since we upgraded UOB from Reduce to Accumulate on 8 Nov 2012, share price dipped marginally before rallying as per our expectations. How do we view this? While the macro economy remains uncertain, we continue to expect UOB to deliver strong results for the next few quarters. Loans growth is expected to be moderate but positive, mitigating the continued pressure on NIMs. Fees and Commission are expected to grow rapidly, driven by strong transaction banking and wealth management performances. Geographically, contributions from UOB’s overseas subsidiaries are expected to increase. UOB may also benefit from an improvement in the China economy, which may drive higher trade volumes and banking services between China and ASEAN, in which UOB has strong capabilities in.
Investment Actions?
We increase our P/B forward multiple to 1.35X, largely in line with the 5 year mean P/B multiple of 1.37X. We roll forward our forecast, and introduce our FY14 estimates. Based on our FY13F BVPS of S$15.52, we derive a new target price of S$20.95. We maintain our “Accumulate” rating, and continue to prefer UOB over DBS and OCBC.
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