Asia United Bank: Undervalued Bank

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Rising poor quality of loans may deter investors

Share price of Asia United Bank (AUB) has remained nearly flat so far this year compared to declining shares of its peers.

The 14th largest Philippine bank by assets reported 15% rise in revenue, or net interest income, and 23% increase in profits in its 2017 operations.

Exact figures for 2017 operations were not available at the time of writing, so figures as of September 2017 quarter will mostly be used moving forward.

In September, AUB had a book value of 26.5 billion leaving it with a price-book value multiple of 1.1x compared to industry figure of 3x.

AUB also experienced a decline of its capital adequacy ratio of 11.05% compared to 14.82% a year earlier.

Unappealingly, AUB’s non-performing loans (poor quality) ratio rose to 1.31% compared to 0.8% a year earlier.

“We are confident that AUB will show accelerated growth on our core lending business as we cater to the needs of corporates and small and medium enterprises. We are making headways in the consumer market, particularly in credit cards, salary and pension loans.”

AUB President Manuel Gomez

In the past three years, AUB allocated 1.6 billion in financing activities while having provided 485.3 million in shareholder dividends.

AUB also had 42.7 billion in cash as of September 2017.

AUB does not appear to be covered by COL Financial while personal estimates indicated a per share figure of 86/share vs. 59.6/share at the time of writing.

Disclosure: No shares in AUB

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