Bursa Malaysia Stock Watch
OSK Holdings
kltrader
Publish date: Tue, 06 Jul 2010, 10:11 PM
kltrader
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Price: MYR1.34
12-Month Target Price: MYR1.60
We expect OSK to post EPS growth of 27.7% YoY in 2011, driven primarily by stronger stockbroking and investment banking incomecontribution in 2011. While 2010 will also see decent earnings growth
of 16.4% YoY, EPS is flat due to dilution from the issuance of new shares from its recent warrants conversion.
Fee based income (essentially from its stockbroking, investment banking and fund management activities) is expected to grow although the recent rise in volatility coupled with easing stock market velocity have dampened our original expectations for 2010. We see some delays in new IPOs but mergers & acquisition activity should continue to see a pick-up. As such, we see a greater recovery in 2011 for equity related activities.
Risks to our recommendation and target price include a drop in market turnover on the regional bourses and additional impairment provisions. These may cause downward revisions in our earnings forecast.
Fiercer-than-assumed competition will result in narrower margins for the investment banking businesses.
Our base case expectation is for the global economy to grow albeit at a sluggish pace over these next two years. We do not expect the current eurozone debt situation to spread significantly so as to impact the global financial system. In this regard, we believe Asian financial markets should see an improving outlook and operating environment.
With OSK currently trading slightly below its historical average PER at 9.4x 2010 EPS and with 2009-2011 EPS CAGR of 12.6%, we believe the present share price level remains relatively attractive given OSK?s
current potential. Its 2010 P/BV of 0.8x is higher than the average of its peers but we feel OSK?s relative larger size should justify a 10% premium. In addition, the company?s growing and material geographical diversification of its earnings should be seen as positive.
Our 12-month target price of MYR1.60 is based on attributing peer group PER of 11.3x to OSK?s 2010 EPS and P/BV of 0.7x and takes into account OSK?s own historical averages. At our target price, OSK would trade on 11.6x 2010 EPS, in line with its peer group.
OSK?s corporate social responsibility undertaking is through its commitment to the marketplace, workplace and the community. It aims to provide comprehensive information about its activities, have a sustainable business, develop human capital, educate the community and contribute to various causes and charities.
Board: Main
Sector: Finance
GICS: Financials/Investment Banking & Brokerage
Market Value - Total: MYR1,287.4 mln
Summary: OSK Holdings (OSKH) has evolved into a niche investment bank with a regional presence from a pure retail stockbroker since its flotation in 1991. It offers investment banking services, equities and futures, private equity and fund management services. The stock is a component of the FBM 70 and FBM EMAS.
Major Shareholders:
Ong Leong Huat @ Wong Joo Hwa 30%
By Standard & Poor's
Analyst: Lorraine Tan, CFA
12-Month Target Price: MYR1.60
We expect OSK to post EPS growth of 27.7% YoY in 2011, driven primarily by stronger stockbroking and investment banking incomecontribution in 2011. While 2010 will also see decent earnings growth
of 16.4% YoY, EPS is flat due to dilution from the issuance of new shares from its recent warrants conversion.
Fee based income (essentially from its stockbroking, investment banking and fund management activities) is expected to grow although the recent rise in volatility coupled with easing stock market velocity have dampened our original expectations for 2010. We see some delays in new IPOs but mergers & acquisition activity should continue to see a pick-up. As such, we see a greater recovery in 2011 for equity related activities.
Risks to our recommendation and target price include a drop in market turnover on the regional bourses and additional impairment provisions. These may cause downward revisions in our earnings forecast.
Fiercer-than-assumed competition will result in narrower margins for the investment banking businesses.
Our base case expectation is for the global economy to grow albeit at a sluggish pace over these next two years. We do not expect the current eurozone debt situation to spread significantly so as to impact the global financial system. In this regard, we believe Asian financial markets should see an improving outlook and operating environment.
With OSK currently trading slightly below its historical average PER at 9.4x 2010 EPS and with 2009-2011 EPS CAGR of 12.6%, we believe the present share price level remains relatively attractive given OSK?s
current potential. Its 2010 P/BV of 0.8x is higher than the average of its peers but we feel OSK?s relative larger size should justify a 10% premium. In addition, the company?s growing and material geographical diversification of its earnings should be seen as positive.
Our 12-month target price of MYR1.60 is based on attributing peer group PER of 11.3x to OSK?s 2010 EPS and P/BV of 0.7x and takes into account OSK?s own historical averages. At our target price, OSK would trade on 11.6x 2010 EPS, in line with its peer group.
OSK?s corporate social responsibility undertaking is through its commitment to the marketplace, workplace and the community. It aims to provide comprehensive information about its activities, have a sustainable business, develop human capital, educate the community and contribute to various causes and charities.
Board: Main
Sector: Finance
GICS: Financials/Investment Banking & Brokerage
Market Value - Total: MYR1,287.4 mln
Summary: OSK Holdings (OSKH) has evolved into a niche investment bank with a regional presence from a pure retail stockbroker since its flotation in 1991. It offers investment banking services, equities and futures, private equity and fund management services. The stock is a component of the FBM 70 and FBM EMAS.
Major Shareholders:
Ong Leong Huat @ Wong Joo Hwa 30%
By Standard & Poor's
Analyst: Lorraine Tan, CFA
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