Stock Commentary: Bank of Commerce looks cheap relative to current PSE peers

Friday, the San Miguel [SMC 102.90 1.08%] the bank set its price per share at P12.00/share, a 4% discount to commercial bankit’s [BNCOM 12.00 pre-IPO] maximum price of P12.50/share. Now that BNCOM has priced, we can take a closer look at how the bank compares to its peers that are already trading on the PSE. The price of P12.00/share and the post-IPO free float will give BNCOM an initial market capitalization of approximately P16.8 billion, putting it within reach of East West Bankit’s [EW 8.43 1.98%] Market capitalization of 19.3 billion pesos, and Asia United Bank’s [AUB 43.40 0.46%] Market capitalization of 20.9 billion pesos. National Bank of the Philippines [PNB 19.68 0.51%] is the second-largest after AUB, with a market capitalization of 30.1 billion pesos, but that’s nearly double the size of baby BNCOM’s IPO.

Price-to-earnings (P/E) ratio: This measure takes the stock price and divides it by earnings per share, to arrive at what is called the P/E ratio, or “multiple” P/E. The higher the number, the higher the stock price relative to the share of the company’s earnings it represents. In this case, BNCOM’s P/E multiple is 1.71, which means that its share price (P12.00) is 1.71 times its earnings per share. EW’s P/E is 3.23. AUB’s P/E is 9.56. PNB’s P/E is slightly lower, at 1.53. This metric suggests that at the bid price, BNCOM is relatively cheap compared to its peers.

Price-to-Book Ratio (P/B): This divides the market capitalization of the company by its book value. The higher the number, the more expensive the stock price relative to the book value (liquidation value) of the stock. Here, BNCOM’s P/B is 0.81, EW’s P/B is 0.32, AUB’s P/B is 0.57 and PNB’s P/B is 0, 20. While this metric suggests the price might be more expensive than its peers, the P/B is still below 1, so the market cap still suggests the company is selling below its liquidation value.

Debt Ratio (D/E): This divides the company’s total liabilities by its equity to get an idea of ​​how much debt/leverage a company is using. The higher the number, the higher the risk of indebtedness. Here, the D/E of BNCOM is 9.2, the D/E of EW is 22.6, the D/E of AUB is 47.4 and the D/E of PNB is 101, 0. This metric suggests that BNCOM is a safer investment compared to its peers when it comes to outstanding leverage/liability.


It will be interesting to see what kind of reception this IPO will receive, as we haven’t seen a bank IPO on the PSE in a very long time.

As noted in a previous post about this deal, this is an offering set up for growth; nearly 90% of the deal is primary, meaning 90% of the money raised will go directly to BNCOM to grow its business.

And it’s not as if this bank is struggling to do business either, given that it has a large portfolio of existing business with SMG Group companies, and all the opportunities that come with to be a longtime component of one of the largest and most diverse in the country. conglomerates.

The comparables we have discussed give the impression that BNCOM is coming to market with a reasonably cheap price and relatively low leverage risk; add to that a plan to grow his loan portfolio, a new universal license and a recurring “whole family” business he should have access to through the SMC group, and I think we have the makings of a no – the bank’s tragic IPO.

Whether the market agrees, and whether it will agree in the long run, is a whole different story.

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Merkado Barkada’s opinions are provided for informational purposes only and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor should do their own due diligence before trading, as the facts and figures in each particular article may have changed.

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