Analyst Research Report Snapshot


Cathay FHC (2882 TT): Strong Performance to Dissipate Market Concerns




MasterLink Securities Corporation


12 May 2014





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Cathay FHC’s stock prices have encountered significant correction recently due to unfavorable sentiment across the financial sector. However, Cathay FHC released positive response to alleviate market concerns (1) Negative consequence of the stalled cross-strait trade-in-services pact. Cathay FHC currently prefers branch expansion in Southeast Asia, to achieve the goal of expansion in Asia, which is also in line with the policy advocated by Taiwan’s regulators. (2) Business tax spike. Cathay FHC stated that the tax hike merely accounts for 4% of the company’s profit. (3) TMU credit risk. Cathay FHC’s RMB-denominated products only accounted for 16% and 9.8% of TMU and TRF activities. We thus believe the market’s concern is overdone, and that Cathay FHC is still attractive given impressive financial results and relatively low valuation (the company is currently trading at 1.2x of PBR). We thus reiterate BUY on Cathay FHC with a TP of NT$51.

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