arif habib bank ltd
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Analyst
Syed Suleman Akhtar, CFA
+92 (21) 561 2290-94 ext. 339
FSL
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BRIEF
Foundation Securities (Private) Limited
Ground Floor, Bahria Complex IIM T Khan Road Karachi
ResearchTel: +9221 5612290Fax: +9221 [email protected]
Equity BrokingTel: +9221 5612365Fax: +9221 5612262
Investment BankingTel: +9221 5612255Fax: +9221 5612262
[email protected]@fs.com.pk
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Saudi
Pak
Atlas KASB My
bank
CCBL JS
Bank
AHBL
P/B Peer group average P/B
KSE Data Index % Ch
KSE-100 13,666.43 -2.91%
KSE-30 16,165.49 -3.30%
KSE All 9,666.65 -2.91%
Stock Change Trend
Plus 108
Minus 236
Equal 24
Market Cap (Rs bn) 4,205
Market Cap ($ mn) 69,382
Turnover (mn shares) 322
Turnover (Rs bn) 27
January 02, 2008
Arif Habib Bank Limited OFS: Subscribe
Arif Habib Securities Limited (AHSL) is selling 119.7mn ordinary shares, including greenshoe option of
60mn shares in case of oversubscription, of Arif Habib Bank Limited (AHBL) through a public offer. At
offer price of Rs21, AHBL shares are available at a P/BV of 1.5x vis--vis sector and peer group P/BV of
2.9x and 2.0x, respectively. Given the limited size of the offering, attractive P/BV valuation vs. industry
and peer group average, strong group backing and brand equity and good performance at the
provisional counter (January 01, 2008 closing Price: Rs32.90), we expect the scrip to initially trade at a
sizable premium to the offer price once the company is formally listed on the ready board. Hence,
successful applicants could reap handsome capital gain on immediate disposal of AHBL shares. We
from a short-term trading perspective. However, for medium to long-term
investors, the bank, being still in infancy, is a question mark. Though AHBL would comfortably meet
SBP minimum paid-up capital requirements, the deposits will have to grow by multifolds to allow the
bank to adequately leverage its equity and earn a decent ROE on a sustainable basis. In our opinion,
the long-term fortunes of the bank would essentially hinge on its ability to quickly raise right mix of
deposits going forward.
The issue
AHSL is offering to sell 119.7mn shares, representing 27% of paid-up capital, of AHBL, through a public
offer. The shares have been offered at Rs21, representing 11 rupees premium to the face value. The OFS
includes an offer of 59.7 million shares together with a green shoe option of 60 million shares in case of
oversubscription. The offer amount inclusive of greenshoe option, comes to Rs2,514mn. Application are
to made for a minimum of 500 shares and then in multiples of 500 shares.The purpose of the OFS is to
diversify the investor-base and meet SBP requirements of public listing within 2 years of start of
commercial operations.
About the bank
AHBL is a majority-owned subsidiary of AHSL, a fast growing conglomerate primarily involved in financial
services business with growing interest in cement, fertilizer and other industries. The bank started its
operations in August 2006 and now has a network of 11 branches. Under an aggressive branch expansion
plan, the banks intends to increase its branch network to 100 branches by 2012. As per the last quarterly
6,181mn, 7,363mn and Rs13,788mn, respectively.
Going forward, the bank can take advantage of group synergies to develop its products and services and
cross-sell to customers of associated companies
Attractive from a trading perspective
At offer price of Rs21, AHBL shares are available
at a P/BV of 1.5x vis--vis sector and peer group
P/BV of 2.9x and 2.0x, respectively. Given the
limited size of the offering, especially in terms of
amount, attractive P/BV valuation vs. industryand peer group average, strong group backing
and brand equity and good performance at the
provisional counter (January 01, 2008 closing
Price: Rs32.90), we expect the scrip to initially
trade at a sizable premium to the offer price
once the company is formally listed on the ready
board. Hence, successful applicants could reap
handsome capital gain on immediate disposal of
AHBL shares.
M O R N I N G B R I E F
Banks
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Foundation Securities (Pvt) Limited 2
Deposit mobilzation would be key determinant of long-term profitability
As AHBL has started off with a huge capital-base, it paid-up capital requirements. However, the deposits will have to grow by multifolds to allow AHBL to
adequately leverage its equity and earn a decent ROE on a sustainable basis. In our opinion, the long-
term fortunes of the bank would essentially hinge on its ability to quickly raise right mix of deposits going
forward.