1、Asia Pacific Equity Research 04 July 2010 Bank of China 3988.HK, 3988 HK Overweight HK$3.97 Price Target: HK$6.10 BOCs rights offering a slightly better outcome for H-share minority shareholders 601988.SS, 601988 CH Overweight Rmb3.40 Price Target: Rmb5.30 China Banks Sunil GargAC (852) 2800-8518 C
2、indy Xu (852) 2800-8502 J.P. Morgan Securities (Asia Pacific) Limited See page 8 for analyst certification and important disclosures, including non-US analyst disclosures. J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be awar
3、e that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. 12M-share price performanceHK$/Rmb 2.02.53.03.54.04.55.0Jul-09 Oct-09 Jan-10 Apr-10 Jul-10H-share A-sha
4、rePerformance 1M 3M 12M H Absolute (%) 4.5 (5.7) 6.7 A Absolute (%) (12.6) (20.7) (27.0) Source: Bloomberg. Board approved A+H rights offering. Share trading was suspended in HK as BOC plans to raise no more than Rmb60bn through A+H rights offering. While a rights offering is slightly different from
5、 its previously planned H-share placement, its equity raising is well expected by the market and the deviation from previously expected H-share placement also makes little difference to the actual size of capital raising from market source, given that we had expected the government shareholder to pa
6、rticipate in either plan. The size of capital raising is also quite close to what we have assumed in our current estimates (about Rmb53bn). Rights issue is slightly better for H-share minority shareholders. Government shareholder Huijin already stated that it will participate in state banks capital
7、raising to avoid dilution; actual size of capital raising from market investors is relatively small. In a Rmb60bn (US$8.9bn) rights offering, although there would be a maximum US$6.15bn offering in A-shares, excluding the portion to be subscribed by Huijin, actual size of capital raising from A-shar
8、e minority investors is minimal at mere US$270mn, while size of H-share capital raising from minority shareholders (excluding SSF) would be only US$2.3bn. A rights offering however gives investors an option to avoid dilution and subscribe to new shares at an attractive valuation. No material change
9、to estimates. The offering would boost its tier-1 to about 9.6% and total CAR to 12.2%. ROE may be diluted to nearly 19% for 2010 and 21% for 2011. These however are already in our estimates as we already factored in a Rmb53bn capital raising in 2H10. While a rights offering means more new shares at
10、 lower offering price and thus 2011E EPS may be at max. 5% lower and BVS about 2.5% lower than our estimates, investors need to look at valuation on TERP basis. Attractively valued, maintain OW. On a TERP basis, A-share is trading at 8x 10E PE, and 1.43x 10E PB, while H share is trading at 8.1-8.2x
11、10E PE and 1.47x 10E PB. We believe BOC is attractively valued and offers significant earnings growth potential, especially when rates start to move up. It remains a top pick in the sector. Key downside risks include prolonged weakness in LIBOR and HIBOR, and further deterioration in global economy.
12、 Table 1: Earnings summary and market data of Bank of China (3988.HK; 601988 CH) FY08 FY09 FY10E FY11E FY12E 2-Jul-10 H-shares A-shares Attributable Earnings 64,360 81,068 108,738 146,536 178,004 52-week range (HK$/Rmb) 3.42 - 4.94 3.39 - 4.72 EPS (Rmb/share) 0.25 0.32 0.42 0.55 0.66 Local shares mk
13、t cap (US$MM) 38,728 89,282 DPS (Rib/share) 0.13 0.14 0.18 0.24 0.30 A+H total market cap (US$MM) 128,010 128,010 ROE (%) 14.5% 16.9% 19.3% 21.3% 22.4% Local shares outs. (MM shrs) 76,020 177,819 ROA (%) 0.99% 1.01% 1.11% 1.27% 1.34% Shares outstanding (A+H) 253,839 253,839 P/E (x) - H share 13.6x 1
14、0.8x 8.3x 6.3x 5.2x Free float 100% 24% P/E (x) - A share 15.3x 13.4x 10.6x 8.2x 6.2x BVPS (Rmb/share) 1.83 2.01 2.38 2.75 3.17 Avg. daily value (US$MM) 154 40 P/BV (x) - H share 1.89x 1.71x 1.45x 1.26x 1.09x Avg. daily volume (MM shrs) 298 68 P/BV (x) - A share 2.05x 1.86x 1.69x 1.43x 1.24x Local e
15、xchange index 19,905 2,534 Div. Yield (%)- H 3.8% 4.1% 5.2% 7.0% 8.6% Exchange rate 7.79 6.77 Div. Yield (%)- A 3.8% 4.1% 5.2% 7.1% 8.8% Price date 2 July 10 Source: Company reports and J.P. Morgan estimates. 2 Asia Pacific Equity Research 04 July 2010Sunil Garg (852) 2800-8518 Company Description
16、P and (2) no part of any of the research analysts compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. Important Disclosures Lead or Co-manager: JPMSI or its affiliates acted as lead or co-manage
17、r in a public offering of equity and/or debt securities for Bank of China - A, Bank of China - H within the past 12 months. Analyst Position: The following analysts (and/or their associates or household members) own a long position in the shares of Bank of China - A: Adrian Mowat. The following anal
18、ysts (and/or their associates or household members) own a long position in the shares of Bank of China - H: Adrian Mowat. Beneficial Ownership (1% or more): JPMSI or its affiliates beneficially own 1% or more of a class of common equity securities of Bank of China - A, Bank of China - H. Client of t
19、he Firm: Bank of China - A is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services, non-investment banking securities-related services and non-securities-related services. Bank of China - H is or was in the past 12 month
20、s a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services, non-investment banking securities-related services and non-securities-related services. Investment Banking (past 12 months): JPMSI or its affiliates received in the past 12 months compensation
21、for investment banking services from Bank of China - A, Bank of China - H. Investment Banking (next 3 months): JPMSI or its affiliates expect to receive, or intend to seek, compensation for investment banking services in the next three months from Bank of China - A, Bank of China - H. Non-Investment
22、 Banking Compensation: JPMSI has received compensation in the past 12 months for products or services other than investment banking from Bank of China - A, Bank of China - H. An affiliate of JPMSI has received compensation in the past 12 months for products or services other than investment banking
23、from Bank of China - A, Bank of China - H. 0123456789101112Price(Rmb)Oct06Jul07Apr08Jan09Oct09Jul10Bank of China - A (601988.SS) Price ChartUW Rmb5.4 UW Rmb4 UW Rmb3.5 N Rmb4.5 OW Rmb5.1UW Rmb6 UW Rmb3.9 UW Rmb3.6 UW Rmb4.4OW Rmb5.53UW Rmb4.5UW Rmb4.4UW Rmb5.6 UW Rmb5 UW Rmb3.5UW Rmb3.8 OW Rmb5OW Rm
24、b5.3Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.This chart shows J.P. Morgans continuing coverage of this stock; the current analyst may or may not have covered itover the entire period.J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.Date
25、 Rating Share Price (Rmb) Price Target (Rmb) 07-Jan-07 UW 5.07 4.50 07-May-07 UW 5.62 4.40 04-Oct-07 UW 5.93 5.60 31-Oct-07 UW 7.17 6.00 11-Jan-08 UW 6.67 5.40 29-Apr-08 UW 4.97 5.00 06-Jul-08 UW 4.02 3.90 28-Sep-08 UW 3.66 4.00 29-Oct-08 UW 3.10 3.50 07-Jan-09 UW 3.00 3.60 04-Mar-09 UW 3.20 3.50 25
26、-Mar-09 UW 3.47 3.80 28-Jun-09 UW 4.63 4.40 28-Aug-09 N 3.90 4.50 01-Nov-09 OW 4.06 5.00 30-Nov-09 OW 4.12 5.53 10-Mar-10 OW 4.14 5.10 24-Mar-10 OW 4.22 5.30 9 Asia Pacific Equity Research 04 July 2010Sunil Garg (852) 2800-8518 0123456789Price(HK$)Oct06Jul07Apr08Jan09Oct09Jul10Bank of China - H (39
27、88.HK) Price ChartOW HK$4.6 N HK$5.7 N HK$5 N HK$4.1 OW HK$5OW HK$6.302OW HK$4.8 N HK$5.3 N HK$4.5 N HK$4.6 OW HK$4.1 OW HK$5.7OW HK$6.1N HK$4.8 UW HK$4.6N HK$4.8 N HK$4.7 OW HK$4 OW HK$5.2 OW HK$5.8Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.This chart show
28、s J.P. Morgans continuing coverage of this stock; the current analyst may or may not have covered itover the entire period.J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.Date Rating Share Price (HK$) Price Target (HK$) 07-Jan-07 N 4.32 4.80 07-Mar-07 OW 3.66 4.80 07-May-07 OW 3.
29、92 4.60 24-Aug-07 UW 3.87 4.60 04-Oct-07 N 4.29 5.30 31-Oct-07 N 4.93 5.70 13-Jan-08 N 3.58 4.80 26-Feb-08 N 3.28 4.50 29-Apr-08 N 3.89 5.00 06-Jul-08 N 3.34 4.70 29-Aug-08 N 3.32 4.60 29-Oct-08 N 2.09 4.10 04-Mar-09 OW 2.16 4.00 25-Mar-09 OW 2.42 4.10 28-Jun-09 OW 3.68 5.00 28-Aug-09 OW 3.81 5.20 0
30、1-Nov-09 OW 4.58 5.70 30-Nov-09 OW 4.37 6.30 10-Mar-10 OW 4.01 5.80 24-Mar-10 OW 4.04 6.10 Explanation of Equity Research Ratings and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight Over the next six to twelve months, we expect this stock will outperform the av
31、erage total return of the stocks in the analysts (or the analysts teams) coverage universe. Neutral Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analysts (or the analysts teams) coverage universe. Underweight Over th
32、e next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analysts (or the analysts teams) coverage universe. J.P. Morgan Cazenoves UK Small/Mid-Cap dedicated research analysts use the same rating categories; however, each stocks expected total
33、 return is compared to the expected total return of the FTSE All Share Index, not to those analysts coverage universe. A list of these analysts is available on request. The analyst or analysts teams coverage universe is the sector and/or country shown on the cover of each publication. See below for
34、the specific stocks in the certifying analyst(s) coverage universe. Coverage Universe: Sunil Garg: Bank of China - A (601988.SS), Bank of China - H (3988.HK), HSBC Holdings plc (0005.HK), Standard Chartered (STAN.L), Standard Chartered Plc (HK) (2888.HK) J.P. Morgan Equity Research Ratings Distribut
35、ion, as of June 30, 2010 Overweight (buy) Neutral (hold) Underweight (sell) JPM Global Equity Research Coverage 46% 42% 12% IB clients* 49% 46% 31% JPMSI Equity Research Coverage 44% 48% 9% IB clients* 68% 61% 53% *Percentage of investment banking clients in each rating category. For purposes only o
36、f NASD/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category. Valuation and Risks: Please see the most recent company-specific research report for an
37、analysis of valuation methodology and risks on any securities recommended herein. Research is available at http:/ , or you can contact the analyst named on the front of this note or your J.P. Morgan representative. 10 Asia Pacific Equity Research 04 July 2010Sunil Garg (852) 2800-8518 Analysts Comp
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