November 24, 2013

MBT’s share price weakness amid market talks of rights issue

There have been market talks regarding a supposed rights issue by the Metrobank following its decision to defer a planned offering of Tier 2 securities. This has been weighing on the share price of the company.

Our take: We called Metrobank to verify such talks. In our note yesterday, we reported that the company flatly denied this even as it highlighted its strong capital position, which is ahead of Basel 3 Tier 1 capital requirements. Note that MBT’s Tier 1 CAR stood at 15.2% as of 3Q13, well-ahead of the 10.0% Tier 1 Ratio requirement (inclusive of capital conservation buffer) of Basel 3 and even before the second sale of its Global Power stake to Meralco.

Thus, MBT does not see the need to raise fresh Tier 1 capital within the next 2-3 years. Otherwise, this would have been both RoE and EPS dilutive and could pose a setback to MBT’s goal of achieving a 15% RoE in the next two years.

In the meantime, MBT’s share price has declined 25% ytd even as we estimate its book value to rise 19% YoY to P49.41 in 2013E and by 9% YoY to P54.06 in 2014E. The company offers a compelling growth story backed by strong capital position. We reiterate our BUY rating on MBT with a target price of P103.40 which is equivalent to 2x 2014E P/BV. – WealthSec