HL Finance: 3Q11 results below expectations.
Net profit was $22.3m, -15% qoq, -12% yoy, with the disappointment coming from weaker-than-expected net interest income arising from weak net interest margins (NIM). While loan growth surprised at +6.3% qoq and +16.1% yoy, BNP sees risk of slowdown into 2012 given the high loan-deposit ratio of 96.8%, the highest since Dec ’07. Expects HLF to compete more aggressively for customer deposits which will result in further downward pressure on NIM.
The house notes HLF is priced at an attractive 0.6x FY11E P/B, but retains Hold rating with TP $3.05, given the co’s unexciting growth prospects and expectations for earnings to contract in 2011 and 2012.
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