Analyst Research Report Snapshot


Yuanta FHC (2885 TT, NT$15.75, N): Upgrade to Neutral




KGI Greater China


07 Nov 2013





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Core business recovering; to benefit from China securities market access opening 3Q13 earnings rose 52% QoQ to NT$2.4bn on better stock market performance Core business to continuing recovering in 2014, with cost synergy on Polaris merger increasing Based on 2014F SOTP BVPS & Yuanta Securities target PB of 1x & Yuanta Bank target PB of 1.1x, we raise our 12M target price to NT$15.1 from NT$14.2; given improving core business, the possibility of entering the China market & potential synergies from the New York Life acquisition, we are less negative on the company; upgrade to Neutral Share price has been in line with the Taiex over the past three months and the shares are trading at 0.95x 2014F BVPS, or 1.05x tangible 2014F BVPS net off NT$18bn goodwill, at the low end of their historical range of 0.8x-2.3x. Based on our 2014 sum-of-parts BVPS forecasts, on which we assign Yuanta Securities a target PB of 1x and Yuanta Bank a target PB of 1.1x, we raise our 12-month target price to NT$15.1 from NT$14.2. Considering improving core business, the possibility of winning special licenses to run securities business in China, as well as potential synergy generated from the New York Life acquisition, we have turned less pessimistic on the company. However, Taiex turnover is unlikely to be sustained above NT$100bn, given slow economic recovery and sustained concerns over QE tempering, thereby capping brokers’ profitability. We upgrade the counter from Underperform to Neutral.

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