…Earnings stage massive rebound
…CSE market cap hits CYP 4.6 bln
Share prices on the CSE staged a spectacular rally following an equally spectacular performance by the Bank of Cyprus shares, which powered ahead to fresh highs, not seen in five years on the back of bumper profits that led UBS to up its target on the BOC shares to CYP 6 per share.
Meanwhile the prospects for the market improved further as the combined results of the CSE listed stocks for 2005 showed total profits of CYP 196 mln against losses of CYP 20.7 mln in 2004, according to Financial Mirror calculations. Excluding the results of Cyprus Airways, the troubled national airline which reported a net loss of CYP 23.16 mln for 2005 compared to a loss of CYP 39.35 mln reported in 2004, the combined results of the CSE improved to CYP 219 mln for 2005.
UBS bullish
The shares of BOC “caught fire” early Tuesday session in first reaction to the 88% increase in 2005 profit to CYP 72.4 mln and after the Bank issued a forecast, stating that it expects its 2006 profits at CYP 120 mln.
“We were on an upward path, which really took off after it emerged that UBS had issued a new buy signal and a higher target price on BOC,” said a broker.
UBS, the giant Swiss bank, with a combined 2 mln plus stake in BOC according to Financial Mirror research, issued Tuesday a new price target of CYP 6.03 (EUR 10.49) on the BOC shares from CYP 4.62 previously and maintained its “buy 1” recommendation on the stock in a report dated February 28, 2006.
UBS said that the Management forecast for 2006 is 12% higher than its own estimates and 40% above average market forecasts. It also makes reference to the 88% increase in ‘05 profit on the back of a 14% increase in income both in Cyprus and Greece as well containment of costs, up only 4%, in spite of the strong expansion drive in Greece. It also noted efforts made by Management to contain provisions.
UBS increased its estimates on BOC earnings per share by 27% for the 2006-08 period. It now sees 2006 EPS at 25 cent per share from 14.4 cent in 2005, rising to 35 cent in 2007 and 45 cent per share by 2008.
“The increase in our estimates is the result of the strong expansion drive abroad as well as the increase in assets, deposits and credit expansion.” UBS also made reference to the Bank’s ROE target of 18% by 2008, which it believes will exceed 25%, allowing for an increase in future profitability above target.
UBS states that based on its new targets, the BOC shares are now trading at a forward p/e of 13 times based on 2008 forecast earnings.
Market cap
The CSE GENX closed 3.96% higher at a fresh five-year high of 2507.65 on heavy volume of CYP 10.11 mln, the first time total volume is above the CYP 10 mln in five years, taking the total gains since the start of the year to 47%.
The total equity market capitalisation according to Financial Mirror estimates now stands at CYP 4.6 bln, up by CYP 1.3 bln since the start of the year.
BOC, with a market cap of CYP 2.07 bln accounted for half of the improvement in the overall market cap, having gained CYP 640 mln in value since the start of the year.
Breakout
BOC shares closed 4.74% higher on the CSE at CYP 3.98 on CYP 4.5 mln volume, taking their total gain since the start of the year to 51% while in Greece, the Bank’s shares closed at EUR 7.16 or CYP 4.11, on EUR 34.3 mln or CYP 19.7 mln volume.
Laiki Bank shares were the second most active, up 3% at CYP 2.73, while Hellenic Bank closed 2.3% higher at 89 cent. SFS was also very active, closing at a fresh record of 10.3 cent.
Earnings rebound
With the majority of listed companies having announced their preliminary 2005 results, the Financial Mirror calculates the combined profits of the CSE at CYP 2198.1 mln from CYP 18.6 mln in 2004, excluding the results of Cyprus Airways.
The Main Market sector increased total profits by 88% to CYP 165.52 mln in 2005 from CYP 88 mln in 2004. The Parallel Market, excluding CAIR, improved its profits from CYP 1.4 mln to CYP 5.9 mln, while the Alternative Market titles overturned a CYP 48.5 mln loss in 2004 into a CYP 2.2 mln profit for 2005.
The Approved Investment Companies sector meanwhile overturned CYP 22.2 mln losses in 2004 into record profits of CYP 45.33 mln for 2005. With a number of companies set to report this week, all the above mentioned figures are liable to change, but the Financial Mirror decided to give an indication of the earnings rebound to confirm the improving trend in the stock market.
It should be noted that of the total CYP 219 mln profits, about 56% or CYP 122.68 were contributed by the three major listed banks, which also explains why all three stock are up 50% since the start of the year and are the leaders of the CSE rally.
(For a breakdown of the earnings according to CSE title, sector and other details, please go to pages 30/31.)
