23 Jan 2022 / by AP Securities (formerly Angping & Associates Securities)
FREE Stock in Focus: UBP (24 Jan 2022) by AP Securities
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Summary of Broker’s Recommendation
|BROKER||RECOMMENDATION||TARGET PRICE||ISSUED ON|
|AP Securities||SELL||67.00||24 Jan 2022|
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Our Partner Broker’s Recommendation
Factoring in the acquisition of Citi and the upcoming P40 Billion stock rights offering, our initial estimate Target Price for UBP is P67.00 per share, based on its mean Price-to-Book (P/B) multiple of 1.0x — equivalent to a potential downside of -35% from its last traded price.
Our Partner Broker’s Analysis
Moody’s Investors Service downwardly revised its outlook on UnionBank of the Philippines (UBP), saying the Aboitiz-led lender’s move to acquire Citigroup’s consumer banking assets in the Philippines could erode its capital buffers at a time of prolonged pandemic uncertainties.
Recall that UBP has agreed to acquire Citi Philippines’ consumer business for P55 Billion, which includes a premium of P45.3 Billion. The acquisition is expected to be finalized by the 2nd half (2H) 2022, and while UBP will be implementing a stock rights offering (SRO) amounting to up to P40 Billion to fund the acquisition, Moody’s still sees that the acquisition may eat into its capital buffers, echoing the sentiment of Fitch Group.
While the acquisition offers UBP a major retail advantage due to the capability to tap Citi’s assets and grow its loan portfolio by about 17.5%, these uncertainties of thin capital buffer may induce some negative sentiment towards the stock.
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