Patria upgrades the main long-term recommendation for Komercni banka from hold to buy. KB is, in our view, significantly undervalued in terms of expected performance. Our 12-month target price of CZK 1,170 implies a 23% stock price growth potential.
Our target price is derived by applying our target book-value multiple of 1.55-1.60x to our 2002E BVPS estimate of CZK 744. The new target price is at the lower end of our previous target range. It also represents a 33% discount to the price paid by Societe Generale, the privatization tender winner, for the 60% stake.
KB stock’s short-term upside potential is more limited, in our view, given that KB trades at a 2001E PBV multiple of 1.54x and has already gained 11% over the past week. Our short-term recommendation is therefore accumulate (previously hold).
The stock’s dramatic fall, which followed the June 28 government announcement of the KB privatization tender winner, was initially caused by profit taking, and then made worse by investors (mostly domestic) closing loss-making positions. Although the share price has recovered somewhat from its one-month low of CZK 796, it is still some 14% below the level of June 28.
(Ondřej Daťka)
(Analysis in .pdf format can be found
here)