06 August 2007
KUWAIT: Abu Dhabi Islamic Bank (ADIB) results for 2006 fell short of our expectations made in our previous report. The bank reported net profit of AED571.9mn in 2006 as compared to our forecasted net profit of AED603.2mn. ADIB's balance sheet size grew at a whopping yearly growth of 63.5% in 2006 as it reached AED36.3bn at the end of 2006.
The contribution of Murabaha with financial institutions reached 29.0% of total assets (2005: 27.2%) while the contribution of Islamic financing reached 31.1% in 2006 (2005: 37.9%). The bank thrust towards Ijara financing can be seen from the yearly growth of 81.2% as it reached AED9.3bn in 2006. In Dec-2006, the bank issued rated unsubordinated unsecured 5-year medium term note (Sukuk) with $800mn maturing in 2011 as part of its $5bn EMTN program.
The net profit of the bank reported a strong increase of 65.7% in 2006 as it reached AED571.0mn. The fee and commission income increased by 91.9% as it reached AED106.7mn in 2006. In Jun-07, Capital Intelligence upgraded the foreign currency long-term and financial strength ratings of Abu Dhabi Islamic Bank to A from A-, with a stable outlook.
ADIB assets reported YTD growth of 13.4% as it reached AED41.1bn at the end of 2Q-2007 from AED36.3bn reported at the end of 2006. ADIB reported a net profit of AED345.9mn in 1H-2007, increasing by 18.5% from AED291.9mn recorded in the corresponding period of the previous year. However, it recorded net profit growth of 32.8% in 2Q-2007 as compared to the same quarter of the previous year. The main factor in the rise in profit has been the investment income which reached AED130.6mn in 1H-2007.
ADIB is one of the market leaders in the UAE banking industry and we believe is rightly placed to exploit the growth in the Islamic banking industry. The bank has been aggressive in opening new branches as its branch network reached 36 by the end of 2006 as compared to 24 recorded in 2005. The bank has recently been diversifying its assets base and is looking at other sectors such as Real Estate and geographies (Egypt) in order maintain growth in its assets and profitability. The bank has good backing in terms of Emirates International Investment Company which augurs well for the future business of the bank.
The combination of the revised projections and the revised cost of equity have led to a value of AED65.1 per share. Based on a forward P/BV multiple of 2.32x 2007 projected book value for the UAE Banking sector, the peer valuation method results in a valuation of AED46.2 per share. Assigning an 80% weight to the DDM value, and a 20% weight to the relative value, the weighted average share value of ADIB came out to AED61.3 per share. At its current market price of AED54.1, ADIB's share is quoting at a discount of 13.4% to its fair value. Hence we maintain our earlier recommendation of "Buy" on ADIB's stock.
KUWAIT: Abu Dhabi Islamic Bank (ADIB) results for 2006 fell short of our expectations made in our previous report. The bank reported net profit of AED571.9mn in 2006 as compared to our forecasted net profit of AED603.2mn. ADIB's balance sheet size grew at a whopping yearly growth of 63.5% in 2006 as it reached AED36.3bn at the end of 2006.
The contribution of Murabaha with financial institutions reached 29.0% of total assets (2005: 27.2%) while the contribution of Islamic financing reached 31.1% in 2006 (2005: 37.9%). The bank thrust towards Ijara financing can be seen from the yearly growth of 81.2% as it reached AED9.3bn in 2006. In Dec-2006, the bank issued rated unsubordinated unsecured 5-year medium term note (Sukuk) with $800mn maturing in 2011 as part of its $5bn EMTN program.
The net profit of the bank reported a strong increase of 65.7% in 2006 as it reached AED571.0mn. The fee and commission income increased by 91.9% as it reached AED106.7mn in 2006. In Jun-07, Capital Intelligence upgraded the foreign currency long-term and financial strength ratings of Abu Dhabi Islamic Bank to A from A-, with a stable outlook.
ADIB assets reported YTD growth of 13.4% as it reached AED41.1bn at the end of 2Q-2007 from AED36.3bn reported at the end of 2006. ADIB reported a net profit of AED345.9mn in 1H-2007, increasing by 18.5% from AED291.9mn recorded in the corresponding period of the previous year. However, it recorded net profit growth of 32.8% in 2Q-2007 as compared to the same quarter of the previous year. The main factor in the rise in profit has been the investment income which reached AED130.6mn in 1H-2007.
ADIB is one of the market leaders in the UAE banking industry and we believe is rightly placed to exploit the growth in the Islamic banking industry. The bank has been aggressive in opening new branches as its branch network reached 36 by the end of 2006 as compared to 24 recorded in 2005. The bank has recently been diversifying its assets base and is looking at other sectors such as Real Estate and geographies (Egypt) in order maintain growth in its assets and profitability. The bank has good backing in terms of Emirates International Investment Company which augurs well for the future business of the bank.
The combination of the revised projections and the revised cost of equity have led to a value of AED65.1 per share. Based on a forward P/BV multiple of 2.32x 2007 projected book value for the UAE Banking sector, the peer valuation method results in a valuation of AED46.2 per share. Assigning an 80% weight to the DDM value, and a 20% weight to the relative value, the weighted average share value of ADIB came out to AED61.3 per share. At its current market price of AED54.1, ADIB's share is quoting at a discount of 13.4% to its fair value. Hence we maintain our earlier recommendation of "Buy" on ADIB's stock.
© Kuwait Times 2007
