ANALYST VIEW - Credit Suisse downgrades Hungary's OTP (2)

OTP

Real-time árfolyam

Információs panel

Following a rally in OTP’s share price Credit Suisse analysts do not believe anymore that the banking paper could be an outperformer, and so in a research note on Wednesday they have lowered their rating for OTP to ‘Neutral’.

Over the past 6-12 months, OTP has been receiving great reviews, a series of upgrades and target price hikes, until Goldman Sachs put an end to this about two weeks ago.Then along came BofA/Merrill Lynch two days ago with a TP raise and a ‘Neutral’ rating, and now there’s this other downgrade.

Credit Suisse said it likes the longer term prospects for OTP no longer.

“We believe that over the medium term Hungarian assets can undergo significant rerating as the market digests the policies of the expected Fidesz government. In addition we believe consensus is too low and consensus upgrades can further support the stock," CS said in a research note on Wednesday.

CS projects OTP’s net income to reach HUF 177.8 bn in 2010, HUF 241.2 bn in 2011 and HUF 269 bn in 2012.

CS noted, however, that OTP’s recent performance has left no upside to the HUF 7,200 target price.

“We set our target price based upon 1.5x 2011e tan NAV. For a bank with a potential ROTE of ~20% we see this book multiple as relatively undemanding."

This low target valuation reflects a number of issues, CS added, particularly “the continued risk of contagion from Greece, the fragility of the Hungarian macro recovery and uncertainty over developments in Ukraine."

In CS’s view, the market is not prepared to pay a significantly higher P/TB multiple for the bank and so it sees further upside capped.

Since mid March, OTP has returned 17.2% in USD terms compared to 8.5%from emerging EMEA banks, CS noted.

“OTP is trading at 1.5x our 2011E Tan NAV and 8x 2011E earnings," it added.

• Tags:
• equity