Hot stock: UOB up 1.8% after strong FY21 results
SHARES of UOB U11 rallied on Thursday (Feb 17) morning after the bank's strong showing for its full-year FY2021 results.
As at 9.29 am, the counter surged 1.8 per cent to hit S$33.33 - an all-time high for the lender - after some 1.2 million shares were traded.
No married deals were recorded according to ShareInvestor data.
The counter eventually closed at S$32.86 on Thursday, up 0.3 per cent.
The bank had posted a fourth quarter net profit rise of 48 per cent to S$1.02 billion for the financial year 2021 on Wednesday.
Following the results, analysts have maintained their "buy" calls on the lender.
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In separate Thursday reports, DBS Group Research, RHB and OCBC Investment Research increased their targets, having all revised their net interest margin (NIM) forecasts upwards.
DBS analyst Lim Rui Wen sees a re-rating cycle ahead for UOB's share price, as the bank is likely to benefit from strong business and the upcoming US Federal Reserve hike.
The research house's view of 5 hikes in 2022 and 2 more in 2023 will be positive for UOB's NIM through FY2023 and beyond, she said, adding that these higher NIM and slightly higher non-interest income projections have resulted in estimates going up 5 to 6 per cent.
Her target price (TP) of S$37, up from S$34.20, is based on higher return on equity (ROE) assumptions, and is equivalent to around 1.4 times the FY2022 estimated price-to-book (P/BV) ratio and is 1 standard deviation above its average 12-year forward P/BV multiple.
Like DBS, RHB raised its estimates due to an upward revision on NIM, with forecasts for FY2022 and FY2023 earnings up 2 per cent and 14 per cent respectively, based on the brokerage's belief that there will be 4 rate hikes in FY2022.
"Given (UOB's) strong fundamentals - resilient asset quality, high allowance buffers, improved CASA (current account saving account) ratio and solid capital - we expect healthy earnings growth in FY2022 and FY2023," the brokerage added.
RHB's new TP of S$38.10, up from S$33.50, follows higher ROE assumptions to 11.5 per cent and is 1.37 times the P/BV ratio. It also includes a 6 per cent environment, social and governance premium based on its methodology, down from the previous 8 per cent due to increased security challenges in banking.
Along with the upsides of NIM, OCBC analysts see the bank benefiting from the gradual border reopening in Asean, which is supportive of further recovery in regional business flows over the medium term.
They are also confident in the bank maintaining its 50 per cent dividend payout ratio, as its total FY2021 dividend of S$1.20 per share implied about 49 per cent dividend payout ratio, up from the previous 45 per cent that arose from the Monetary Authority of Singapore's dividend cap regulation.
The brokerage thus pencilled in a fair value of S$36.50, which is 1.33 times the current P/BV ratio, noting that the lender's share price has gained around 21 per cent and outperformed the sector since their previous "buy" reiteration.
Meanwhile, Maybank Securities on Thursday kept "buy" and increased its UOB TP to S$36.69, which is 1.4 times the FY2022 estimated P/BV ratio, from S$31.15, and raised FY2022-2023 earnings by 7 to 12 per cent.
Its analyst Thilan Wickramasinghe cited growing ROEs above 12 per cent by FY2023, based on factors such as a normalised interest environment, savings through digitalisation and expanding fee income with the acquisition of Citi's consumer banking assets in 4 Asean markets, which should integrate by H2 of FY2022.
As for Jefferies, analyst Krishna Guha on Wednesday stuck with his previous TP of S$33.50 as he noted the recent earnings were a "stable set of numbers" and broadly in line with consensus, electing not to revise any estimates upwards.
"We will look for a bit more colour on the normalisation of credit cost and the implied allowance expense for FY2022," he added.
READ MORE:
- Hot stock: UOB shares hit all-time high of S$32.86
- Hours-long UOB mobile app disruption fixed; breach ruled out, probe under way
- Brokers' take: Analysts largely positive on UOB's purchase of Citi assets
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