A re-rating is warranted. Acquiring ECM Libra Investment Bank (ECM IB)
will catapult Kenanga into the number 3 position by equity trading value
market share. More significant, however, is that the group has returned
to the black with much improved asset quality, while the merged entity
could potentially be the largest stand-alone investment bank (IB) in the
country. Trading at an adjusted P/BV of just 0.6x, valuations are
undemanding. Kenanga is Not Rated but we have tacked on a fair value of
MYR0.90 (38% upside), pegged to a peer average P/BV of 0.8x, supported
by an estimated ROE of 6.8%.
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Source: Maybank Research - 18 June 2012
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