Sharelink Securities & Financial Services has revised higher its forecasted profit and price targets on Bank of Cyprus Pcl following the release of the 9M results.
“Currently we project PAT of €300m, €356m and €427m for 2006, 2007 and 2008, compared with our previous estimates of €276m, €323m and €399m, respectively” the head analyst of Sharelink, Andreas Constantinou wrote in his research note dated November 3 on BOC.
“We also believe that the risk to our earnings forecasts is on the upside due to possibly higher NII and lower provisions. Based on our model, we currently forecast a RoE of
21.4%, 22.5% and 24.0% for 2006, 2007 and 2008, compared with our previous estimates of 19.6%, 20.1%, and 21.7%.”
Sharelink is forecasting an EPS CAGR of 50.4% for the period 2005-2008, which is supported by the Group’s income enhancement plans, the continuation of its dynamic expansion in
The Group’s Management noted that based on the y-t-d results, the indications for their further development, as well as the current conditions in the markets in which the Group operates, it is expected that PAT for the full year of 2006 will exceed the target of €277m (£160m) which was set and announced in July 2006. According to Management, the expected improvement in PAT is due to an expected improvement in the profitability at the operating level, as well as the expected reduction of the provisioning charge to less than 1% of total loans in 2006.
Management has noted that the target to improve the ratio of non-performing loans to total loans to below 7.5% at the end of 2006 compared to 9.3% as at 1 January 2006 has already been achieved. This ratio has improved to 6.6% at 30 September 2006. By mid-January 2007 Management is expected to announce the strategic targets of the Group for the three-year period 2007-2009.
“We believe that the new targets for 2007 and 2008 will be higher than those included in the three-year strategic plan for the period 2006-2008.”
Sharelink have raised their price target on the stock at €11.00/share from €10.58/share before, in order to reflect the upgrades in the earnings forecasts. At this price BOCY would be trading at a 2006F P/B of 4.0x against an estimated 2.9x-3.2x for 2006F and 2.7x-2.9x for 2007F for the Greek banking sector, which is the closest comparable to the Cypriot banks due to their increasing exposure to the Greek market. The estimated range of BOCY’s RoE for the period 2006-2008 is 21%-24% compared to a 2006F RoE of 20.0%-22.0%, a 2007F RoE of 22.0%-24.0% and a 2008F RoE of 24%-26% for the Greek banking sector.
On a P/E multiple basis, based on a price target of €11.00/share, BOCY would be trading at a P/E multiple of 20.0x, 17.0x and 14.0x for 2006F, 2007F and 2008F, against an estimated 2006F P/E of 16x-18x, a 2007F P/E of 13x-15x and a 2008F P/E of 10x-12x for the Greek banking sector.
“We believe that this is justified by BOCY’s stronger earnings momentum for the period 2005-08 (estimated CAGR of 50.4%) compared to an estimated 20-22% CAGR for the Greek banking sector,” Sharelink said. The stronger EPS growth of BOCY is supported by the Group’s income enhancement plans, the continuation of its dynamic expansion in
