* Business Summary
-
China Merchants Bank is a China-based commercial bank.
-
China as its main market.
-
The bank is operating its businesses through (1) = Wholesale Finance Segment; (2) = Retail Finance Segment and (3) = Other Segment
-
WHOLESALE FINANCE SEGMENT consists of SAVINGS and LOANS;SETTLEMENT and CASH MANAGEMENT SERVICES; TRADE FINANCE and OFFSHORE BUSINESSES; INVESTMENT BANKING; INTERBANK LENDING; BUYBACK and OTHER INTERBANK BUSINESS; ASSET CUSTODY BUSINESS; FINANCIAL MARKET BUSINESS and OTHER BUSINESSES.
-
RETAIL FINANCE SEGMENT includes SAVINGS and LOANS, BANK CARD SERVICES, WEALTH MANAGEMENT, PRIVATE BANKING and OTHER SERVICES.
-
OTHER SEGMENT consists of investment real estates and the operations of the Company’s subsidiaries, affiliated companies and joint venture companies.
* FY2016 Financial Data Analysis
-
NET PROFIT MARGIN = 29.84%
-
OPERATING MARGIN = 37.59%
-
RETURN ON ASSETS = 1.12%
-
RETURN ON EQUITY = 15.93%
-
CASH FLOW PER SHARE = 3.12
-
PRICE / CASH FLOW PER SHARE = 8.22
-
DIVIDEND YIELD (5 YEAR AVERAGE) = 3.74%
-
DIVIDEND GROWTH RATE (5 YEAR) = 13.28%
-
PAYOUT RATIO = 29.29%
-
EPS GROWTH (5 YEARS) = 8.93%
-
CM Bank uses little or no debt in its capital structure.
-
Analyzing CM Bank’s financial performance in 2016 – YoY, both dividends per share and EPS excluding extraordinary items growth increased 10.62% and 7.60%, respectively.
-
When measured on a five year annualized basis, both dividend per share and earnings per share growth ranked in-line with the industry average relative to its peers.
* Our View on 3968.HK
-
Efforts have been made to transform CM Bank into asset-light bank over the past 12 months.
-
Market consensus also expecting that in the coming 5 years, the bank will further refine its capital, liabilities, revenue structure and operations.
-
Most upbeat about CM Bank’s cutting edge in retail business over its peers – hence, average profitability.
-
Media report in recent weeks suggested that, China Banking Regulatory Commission (CRBC) has advised banks to conduct a review on credit risks to overseas Merger & Acquisitions, particularly focusing upon lines of credits, loans and bonds etc. Latest reports suggested that, those are routine normal practice + part of the overall financial system examination / cleanup process. The policy makers are now in the latter stage of information collection and so far no significant negativity found during the examination process.
-
In my opinion, there are still valuation upsides.
-
Buy rating with near-term price target = HK$27.60, share price retreat provides buying opportunity.
-
Cut-loss price @ Weekly chart MA(20) = HK$20.70.
I, Michael Fung, am a licensed person under the Securities and Futures Commission. Until the date this commentary was published, neither I and/or my affiliates are the beneficiary of the securities mentioned herein or are entitled to any financial interests in relation thereto.
本人馮兆山為證監會持牌人士。截至本評論文章發表日止,本人及/或其有聯繫者並無持有全部提及之證券的所有相關財務權益.