Posted on September 10, 2011

GOLDMAN Sachs has reiterated its ‘buy’ recommendation on Commercial Bank of Qatar and raised net income estimates of the Qatari lender for 2011-14 period by an average five percent reflecting higher loan growth. “Our revised 24-month, NAV-based price target of QR123.85 (QR112.78 previously) offers a 63 percent upside potential.

Valuations for CBQ are compelling, in our view, relative to our EM (emerging markets) banks coverage as well as its own trading history”, it said. 

The stock trades at 8.5 times its 2012 estimated earnings which is at a 20 percent discount to emerging markets banks coverage despite generating a top quartile ROA of 3 percent, Goldman Sachs said in a press release. It forecast a 2011 dividend yield of 10 percent, robust capitalisation levels (CAR of 19 percent) and said that robust fundamentals justify a significant re-rating. 

“Stock price weakness is not justified, in our view: CBQ’s stock price is down 18 percent year-to-date, and has underperformed MSCI of EM by 5 percent and peers by 20 percent,” it said. “We believe this is on account of limited loan growth visibility for CBQ pre-Q2 2011 results; regulatory changes on the retail and Islamic business; foreign ownership limit; and asset quality concerns,” it said.

The report also said that 2011 first half results alleviate some of these concerns as they reflected broad-based loan growth (up 14 percent qarter on quarter), stable asset quality trends with falling cost of risk and thus far limited impact of regulatory changes.

“We believe Q2 2011 results and management’s positive loan growth outlook addresses concerns that, in our view, have impacted price performance,” it added

source: Qatar Tribune

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