UOB - DBS Research 2020-11-24: Ongoing Provisioning Is A Buffer; Target Price Raised

UNITED OVERSEAS BANK LTD (SGX:U11) | SGinvestors.io UNITED OVERSEAS BANK LTD (SGX:U11)

UOB - Ongoing Provisioning Is A Buffer; Target Price Raised

  • UOB's current valuations still inexpensive at near 1.5SD below its average 15-year forward P/BV.
  • Ongoing provisioning is a buffer.
  • Some negatives, including lower net interest income and overhang from asset quality, has been priced in.



Inexpensive valuation; ongoing provisioning is a buffer.



Some negatives have been priced in.

  • Despite the dividend cut, UOB's yield of c.4% is relatively attractive, with management indicating willingness to revert to its FY19 dividend policy.
  • We believe the market has priced lower net interest income in FY21F. As we expect some asset quality deterioration in 2H20 and 1H21, especially when the various moratoriums and reliefs expire, share price upside may be capped at ~1x P/BV.


Potential catalyst: Sustained positive deliveries.

  • Lower–than-expected credit costs could drive earnings. Recovery in ROE post COVID can drive UOB's share price.


UOB - Valuation:


Where we differ:

  • We remain conservative over UOB’s income outlook in FY21-22F; we believe that management is likely to continue strict cost discipline to manage its bottom line.





Rui Wen LIM DBS Group Research | https://www.dbsvickers.com/ 2020-11-24
SGX Stock Analyst Report BUY MAINTAIN BUY 24.80 UP 22.200



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