SINGAPORE (Nov 13): DBS says Hong Leong Finance has a unique role to play in the SME lending scene in Singapore and looks set to benefit from better macroeconomic environment.
In 3Q17, Hong Leong Finance is starting to see better loan growth and loan yields return, in line with higher systemic loan growth and better interest rate outlook.
See: Hong Leong Finance reports 84% rise in 3Q earnings to $23.6 mil
In a Monday report, analyst Lim Sue Lin says the finance company’s strong 9M17 earnings has prompted the house to raise FY17 earnings by 5% on higher NIM and loan growth.
With a positive outlook on the macro front and interest rate environment, Lim also expects loan growth and NIM to improve, hence raising FY18-19 earnings by 5-13% p.a.
Sustained improvement in earnings traction should be positive to share price.
Lim also believes that with the MAS’ rule relaxation on fincos in mid-Feb 2017, which lifted the limits on uncollateralised loans as a percentage of capital funds and liberalised its existing policy to allow a foreign takeover of a finco, opens new opportunities for Hong Leong Finance.
DBS is maintaining its “buy” with unchanged $3.20 target price.
The counter is up 2 cents to $2.74 or 13.8 times FY18 forecast earnings.
