{"id":326129,"date":"2023-12-15T12:35:37","date_gmt":"2023-12-15T04:35:37","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=326129"},"modified":"2023-12-15T12:35:39","modified_gmt":"2023-12-15T04:35:39","slug":"stock-in-focus-unionbank-of-the-philippines-ubp-15-dec-2023-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-unionbank-of-the-philippines-ubp-15-dec-2023-by-ap-securities\/","title":{"rendered":"Stock in Focus: Unionbank of the Philippines (UBP) – 15 Dec 2023 by AP Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>UBP<\/td><\/tr>
Company Name<\/strong><\/td>Unionbank of the Philippines<\/td><\/tr>
Broker<\/strong><\/td>AP Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>15 Dec 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Hold<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 73.51<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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Long-term prospects are bright but HOLD for now. While all of this seems exciting, we would caution investors from loading up excessively on UBP shares. The bank\u2019s ROE has underperformed its peers, and while the ongoing Citi integration is definitely a major reason, we also noticed that provisioning has been a growing problem for the bank, something which was especially noticeable in Q3 and could further worsen in Q4. We would therefore advise investors to HOLD for now, with any accumulation to be done sometime in 1Q 2024 following the release of 2023 results and their accompanying outlook.<\/p>\n\n\n\n

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

Capital stock expansion gets the green light<\/h3>\n\n\n\n

In a disclosure that was posted last December 06, UBP announced that the SEC has given the go-signal regarding the bank\u2019s plan to increase its authorized capital stock from P35.31-Billion to P60.31-Billion. The increase will be accompanied by a 27% stock dividend, in compliance with the requirement that at least 25% of an authorized capital stock expansion must be subscribed to. This means that for every 1 UBP share that an investor holds, he\/she will receive an additional 0.27 shares, with a total of 635.52-Million shares being disseminated to all qualified stockholders as of ex-date. Based on the disclosure, ex-date has been set at Dec. 21, 2023, while payment date is on Jan. 4 of next year.<\/p>\n\n\n\n

Stock dividends could signify future equity raising<\/h3>\n\n\n\n

At first glance, no real impact seems to have been made given that the total value of investors\u2019 holdings will remain the same. While stockholders would own more shares, this would be offset by the downward adjustment in the share price as well as in the other per-share metrics. Nevertheless, we note that there is actually some cleverness in management\u2019s move. By choosing to issue stock dividends instead of engaging in an FOO or SRO in order to comply with the 25% subscription requirement, the bank is able to open the doorway towards a potential equity raise in the future (given the increase in authorized capital stock) without causing additional dilution to shareholders in the present.<\/p>\n\n\n\n

Had the former two methods been used, then investors would have had to go through two rounds of dilution in the event that UBP does tap into the capital markets. Given the consensus views on macroeconomic conditions, it could be possible that UBP would seek to take advantage of its newfound equity-raising capacity (as a result of the increased authorized capital stock) in the latter part of FY24 when receding interest rates lead to warmer market valuations.<\/p>\n\n\n\n

We expect that any capital raise will likely be directed to support the growth of its consumer and digital-centered segments. On a shorter-term basis, the stock dividends would also lead to a higher share count circulation which would help improve the liquidity of UBP\u2019s stock.<\/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>