Hong Leong Finance

[winston]

Not vested

Maintain HOLD

At current levels, we believe HLF is priced at an attractive 0.7x 2011E BV.

Notwithstanding, we retain our HOLD recommendation given the company’s unexciting growth prospects with earnings expected to contract in 2011 and 2012.

Our TP is based on 13x 2011E core EPS, in line with the stock’s post-Asian financial crisis average.

Downside risks to TP are a sharp spike in interest rates and if the deposit base continues to shrink.

Upside risk is if HLF emerges as a takeover target.

Source: BNP

[winston]

not vested

Hong Leong Finance- Tough times don’t last, but tough companies do!
(BUY/S$2.40/Target: S$3.15)
FY11F PE (x): 10.6
FY12F PE (x): 11.9

Damage from competition. Competition and structural changes in the financial services industry has permanently shifted Hong Leong Finance’s (HLF) ROE from 8% to 6%.

The advent of floating rate packages has reduced yields from housing loans. HLF also lowered its enterprise base rate for SME loans to match competition from banks with 3-month SIBOR hitting new lows at 0.35%.

Net interest margin (NIM) compressed from 2.6% in 2010 to an estimated 2.2% in 2011.


Attractive valuations. HLF trades at a P/B of 0.67x, a discount of 32.6% to NAV/share of S$3.56.

Its current P/B is almost 1SD below its long term mean of 0.88x.

The stock also provides an attractive dividend yield of 5%. We value HLF at S$3.15 based on a P/B of 0.56x derived from the Gordon Growth Model (ROE: 5.8%, required return: 8.0% and constant growth: 3.0%) adjusted by surplus capital of S$1.10/share.


Source: UOBKH

[winston]

not vested

Strong loans but weak earnings

HLF reported 3Q11 net profit of S$22.3m, down 15% QoQ and 12% YoY.

9M11 net profit of S$75m represents 75% of our pre-results FY11 net profit forecast.

Net interest income fell 2% QoQ, as prices for all categories of lending products came under pressure from excess liquidity.

However, HLF recorded a strong 6.3% QoQ loan growth, building on 2Q11’s 2.9%.

With concerns on slowing Singapore economic growth, we do not see any catalyst driving HLF share price up.

We are lowering our P/B target to 0.65x (from 0.9x previously), which yields our new target price of S$2.42. Downgrade from BUY to NEUTRAL.

Source: DMG

http://www.remisiers.org/cms_images/res ... 11_DMG.pdf

[winston]

not vested

Malaysian banks will be able to upgrade their limited licence in Singapore. (Malayan Bank is the only Malaysian bank with a qualifying full bank licence - allowed 25 service locations.)

Another possible candidate for some consideration, we like to believe, is HLF under Kwek Leng Beng’s chairmanship. A merger with Hong Leong Bank Sdn Bhd, controlled by his cousin brother Tan Sri Quek Leng Chan would make eminent sense.

HLF has severely lagged the banks (see attachment below), which we would attribute to its unsteady dividend policy. It will get a significant boost.

We are upgrading HLF to a BUY, largely because of its underperformance. A maintained dividend at 2010’s 12 cents would give a yield of 5%.

Source: Lim & Tan

[winston]

not vested

HLF: Higher 4Q11 sequential earnings on more provision writeback (NEUTRAL, S$2.45, TP S$2.42)

HLF reported 4Q11 net profit of S$24.7m, down 5.6% YoY, but up 11% QoQ. FY11 net profit of S$99.8m was above our S$93m forecast, due to more provisions writeback.

HLF recorded a 5.2% QoQ expansion in loans, building on 3Q11’s 6.3%, which is a positive.

We cut FY12 and FY13 net profit forecasts by 9% and 5% respectively to factor in weaker net interest income – management indicated that pricing for all categories of lending products continued to come under pressure.

With concerns on slowing Singapore economic growth, we do not see any catalyst driving HLF share price up. Our target price of S$2.42 is pegged to 0.65x book. Maintain NEUTRAL.

Loans YoY expansion much stronger than deposit growth. Loans rose 5.2% QoQ or 18.7% YoY to S$7.45b. Deposits rose 6.0% QoQ or 8.1% YoY to S$7.76b. Although 4Q11 deposits’ growth is a positive versus 3Q11’s 2% sequential contraction, the stronger YoY loan growth versus deposits has translated to a higher loan deposit ratio.

This could cap loan growth going forward.

Pre-provisioning operating profit contracted 1.5% QoQ. However, PBT was up 12% QoQ as provisions reversals doubled sequentially to S$7.1m.

Target P/B is lower than historical average. HLF trades at a historical average P/B of 0.95x. With the uncertain economic environment, we do not see any catalyst driving its share price to that level. Our target P/B of 0.65x is a premium to the 2009 global financial crisis low of 0.5x.

Source: DMG

[winston]

HLF: Weaker 1Q12 earnings on reversion to provisions (NEUTRAL, S$2.49, TP S$2.42)

Sharp earnings decline due mainly to general provisions.

HLF reported 1Q12 net profit of S$16.7m, down 37% YoY.

Whilst pre-provisioning operating profit was down a less severe 12% YoY to S$21.3m, provisions of S$1.2m (versus 1Q11’s write-back of S$7.6m) contributed to the severe earnings contraction.

We cut FY12 net profit forecast by 17% to S$67.2m to reflect the 1Q12 weakness, as well as expectations of continued weakness in net interest income, as pricing for lending products remained under pressure.

On a positive note, loans expanded 6.3% and deposits rose 8.2% QoQ, reflecting the balance sheet growth.

We maintain our target price of S$2.42, which is pegged to 0.65x book.

Neutral recommendation re-iterated.


Loans and deposits both grew strongly.

Loans rose 6.3% QoQ or 22.3% YoY to S$7.92b.

Deposits rose 8.2% QoQ or 14% YoY to S$8.4b. The strong deposit growth is a positive, as it provides scope for further loan expansion going forward.

Target P/B is between historical average and crisis low. HLF trades at a historical average P/B of 0.95x.

With the uncertain economic environment, we do not see any catalyst driving its share price to that level.

The soft pricing for lending products will also reduce investors’ interest in HLF.

Our target P/B of 0.65x is a premium to the 2009 global financial crisis low of 0.5x.


Source: DMG

http://www.remisiers.org/cms_images/res ... atters.pdf

[winston]

not vested

Income: -4%
Profit: -44%
NAV $3.62

Divs 0.04
Ex-Date: Aug 30

http://info.sgx.com/webcoranncatth.nsf/ ... penelement

[winston]

not vested

Time: 12:45PM
Exchange: SGX
Stock: HL Fin(S41)
Signal: Bullish MACD Crossover
Last Done: $2.73


Source: UOBKH

[winston]

not vested

Time: 5:04PM
Exchange: SGX
Stock: HL Fin(S41)
Signal: Resistance - Breakout with High Volume
Last Done: $2.73

Source: UOBKH

[winston]

not vested

Time: 9:15AM
Exchange: SGX
Stock: HL Fin(S41)
Signal: Bullish MACD Crossover
Last Done: $2.73

Source: UOBKH