{"id":323581,"date":"2023-06-08T01:34:13","date_gmt":"2023-06-07T17:34:13","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=323581"},"modified":"2023-06-08T01:34:15","modified_gmt":"2023-06-07T17:34:15","slug":"stock-in-focus-security-bank-corp-secb-8-june-2023-by-rcbc-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-security-bank-corp-secb-8-june-2023-by-rcbc-securities\/","title":{"rendered":"Stock in Focus: Security Bank Corp. (SECB) – 8 June 2023 by RCBC Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>SECB<\/td><\/tr>
Company Name<\/strong><\/td>Security Bank Corp.<\/td><\/tr>
Broker<\/strong><\/td>RCBC Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>8 June 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 109.00<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

We set our target price for SECB at Php109.00 per share. This is based on a Price-to-Book ratio (PBR) of 0.60x, halfway between the bank\u2019s current 12-month forward PBR of 0.48x and 2021 PBR of 0.73x. <\/p>\n\n\n\n

SECB’s share price has dropped 9% since May 11 and the stock is now trading at bargain levels of 0.5x PBR and 6.4x PE. Our Target Price offers a potential share price upside of 26.0% and a total potential return of 29.5% inclusive of our 3.5% dividend yield forecast.<\/p>\n\n\n\n

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Analysis and Opinion<\/h2>\n\n\n\n

Net income 13% lower year-on-year (y\/y) to Php2.4 billion<\/strong><\/p>\n\n\n\n

SECB recorded 1st quartter (1Q) 2023 net income at Php2.4 billion, 13% down y\/y. Net interest income (NII) increased by 7% to Php7.5 billion as loans grew by 5%, while deposits slipped by 1%. Net interest margin (NIM) declined by 27bps y\/y to 4.06%. Fee income inched 2% higher to Php1.3 billion y\/y while foreign exchange gains dropped by 38% to Php205 million. These brought operating income to climb by 6% to Php9.8 billion. However, operating expenses rose by 21% to Php6.7 billion, leading to the decline in earnings and rise in cost to income ratio by 3.6ppts y\/y.<\/p>\n\n\n\n

Stable asset quality<\/strong><\/p>\n\n\n\n

In terms of asset quality, SECB improved on a yearly basis with NPL ratio declining by 53bps and NPL cover growing by 9ppts to 99% in 1Q 2023. However, we note on a q\/q basis, SECB performed similar to most of its counterparts with NPL ratio increasing by 17bps and NPL cover was flattish.<\/p>\n\n\n\n

NIM expansion q\/q<\/strong><\/p>\n\n\n\n

NIMs were able to grow by 14bps q\/q to 4.06% in 1Q 2023 driven by shedding of high-cost deposits and some short-term loans marginally priced. Management provided guidance for NIMs, saying that it should stay flattish or go a little bit higher. However, they also noted that further growth in interest-earning assets could drag NIM as well.<\/p>\n\n\n\n

Forecasts<\/strong><\/p>\n\n\n\n

We estimate FY23F\/FY24F net interest income to grow 8.7%\/9.3% on the back of our conservative loan and deposit growth forecast of 8% this year and another 10% next year. With the pausing of rate hikes, we see net interest margins declining by 20bps and 10bps, respectively. We forecast non-interest income to fall by 13% mostly attributed to lower FX gains on the appreciation of the peso to USD. Operating expenses are projected to climb by 5.8%\/4.7%. Lastly, core net income is estimated to decline by 3% this year but rise by 16.6% in 2024.<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>