* 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.
本文所包含的意見、預測 及其他資料均為本公司從相信為準確的來源搜集。但本公司對任何因信賴或參考有關內容所導致的損失， 概不負責。 輝立証券(香港)有限公司，及其附屬公司，均隨時可能替報告內容所述及的公司提供投資、顧問或其他服務，或買賣 (不論是否以委託人身份)及擁有報告中所述及公司的證券。本文並不存有招攬任何證券買賣的企圖。