[ET Net News Agency, 20 September 2017] Goldman Sachs raised its target price for Bank
of East Asia (BEA)(00023) to HK$32.2 from HK$32.5, but downgraded its rating to "sell"
from "neutral" given its full valuation.
The research house said BEA's valuation either pricing too steep a ROE recovery over the
medium term or too high an earnings growth outlook. The stock is trading at 1x 2018 P/B vs
2018/19 ROE 6.4%/6.7% and 16.8x/15.5x 2018/19 P/E versus local banks at 1.4x 2018 P/B
versus 2018/19 ROE 10.7%/11% and 13.9x/12.8x 2018/19 P/E.
While BEA printed strong 1H earnings, showing good traction de-risking the book and
improving the profitability of the business, credit costs and operating expenses
contributed heavily to the 1H earnings beat, Goldman noted.
The research house expects a flattish credit cost outlook and a slight improvement in
cost-income ratio from hereon, meaning that a steep ROE recovery as implied by current
valuations will need to come from better revenue ROA. (KL)
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00023 BANK OF E ASIA
Nominal 
9.480 +0.050 (+0.530%) Others
20/09/2017 17:51
[I-bank focus]Goldman downgrades Bank of East Asia to "sell"
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