Asia United Bank: Prospectus Highlights (Summary & Recommendation)
AUB at the offer price of P95/share, with a book value estimate of 58.34 – 59.24 (assuming exercise of overallotment/OA), registers a Price-to-Book Value (PBV) of 1.63 – 1.60x.
Based on a 2 – 2.3x PBV range, which is the current PBV range in the banking sector, we forecast a Price Target Range of 116 – 128. Assuming full exercise of OA, Price Target Range increases to 118 – 130. The closest comparable to AUB is EastWest Bank (EW) which currently trades at 2.67x.
With a primary offer of 80,000,000 shares, representing a 25% public float, the company will raise Gross Proceeds of P7.6 billion and Net Proceeds of P7.2 billion. The offer runs from May 7 – 14, and the company is expected to list on May 17, Friday.
AUB is a medium-sized commercial bank that has been in operations for 15 years. As of end-2012, the bank had 107 branches, including 68 branches strategically located in Metro Manila and 100 ATMs. In Feb. 2013, the bank’s application for a universal banking license was approved and will be effective in Q4 2013.
Earnings (2012 & Q1 2013)
In 2012, AUB earned P1.4 billion in Net Income and registered a Return on Average Equity of 13.60% . Total assets, Tier 1 Capital Adequacy Ratio and Total Capital Adequacy Ratio were P64.9 billion, 15.0% and 15.4%, respectively. The bank had maintained a healthy NPL ratio of 1.90% despite recent bank acquisitions (i.e. Asiatrust Bank) and has increased NPL coverage ratio at 120%. In Q1 2013, AUB earned P523 million, 62% higher from the same period in the previous year due to higher loan volume and trading gains. Total Assets further increased to P69 billion and Return on Equity to 18.3%. Note: Q1 2013 figures represented 37% of full-2012 Net Income.
Use of Proceeds
Acquisitions / Payments for Branch Licenses
within 3 years
Expansion of Branch Network
within 3 years
within 5 years
General Corporate Purpose*
within 2 to 3 years
Estimated Net Proceeds*
Currently, the bank has 54 branch licenses as a result of recent bank acquisitions and is authorized to open branches in restricted areas of Metro Manila with a 3-year grace period. The bank projects to open 20 new branches in Metro Manila 2013, 33 in 2014; and 25 new branches outside Metro Manila in 2013, 10 in 2014. The bank also expects to add 45 and 43 ATMs at the end of 2013 and 2014, respectively.
It also intends to acquire 35 more licenses for branches outside Metro Manila. Currently, the bank is in negotiations for the acquisition of a rural bank operating in Central Luzon; however, as of the date of the prospectus, there have been no definitive agreements.
From 107 as of the end-Dec. 2012, the bank expects to grow its branch network to 161 by end 2013, 195 by 2014. As reported in newspapers, the bank wants to have 250 branches by end 2015 and to grow its assets to P500 billion in the next 5 years (est. 2017) from the current P69 billion (as of end-March 2013).
The bulk of the proceeds P4.6 billion (65%) will be used for General Corporate purposes (within 2-3 years), particularly growing AUB’s interest-earning asset base and conducting brand-building, advertising and corporate marketing activities.
The bank’s recent strategy is in line with its vision to become the “bank of choice” catering to corporates and SMEs through product-feature innovation and technological enhancements. Read more on AUB’s Competitive Strengths and Key Strategies in AUB / Prospectus Highlights.
AUB has no specific dividend policy and has not distributed dividends since the beginning of operations. As of December 31, 2012, AUB’s surplus amounted to P8.6 billion.
The top 3 shareholders are listed below as well as the dilution to shareholdings after the offer (with the exercise of OA). The shares of the top 3...
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