Target RM11.00
Integration costs for EON Bank were behind Hong Leong Bank's slight shortfall in 1HFY6/12 earnings, which came in at 46% of our full-year forecast but 50% of consensus. The increase in gross interim DPS from 9 sen a year ago to 11 sen was a positive surprise. We cut FY12 EPS for higher integration costs and lower non-interest income. But the rise in projected net DPS from 18 sen to 23 sen lifts our target price (10% discount over DDM value). Reiterate Underperform given below-industry loan growth and above-sector P/E.
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