AfricaPress-Tanzania: CRDB Bank stocks are trading at a discount price and analysts put a buy tag due to the lender’s strong fundamentals.
The stock closed last Friday trading at 235/- a price, which analysts said was undervalued and suggested an intrinsic price of 367/- a share.
Tanzania Securities analysed CRDB Bank using last year quarter four financials, saying they recommend a medium buy for the stock.
“The stock, which is of good value, is currently underpriced and has strong fundamentals,” Tanzania Securities said in a special report for CRDB Bank issued last week.
Tanzania Securities said they valued the bank at a fair value price of 367/58 per share or price earnings ratio for this year P/E of 5.94 times while EV/EBITDA of 58.63 times.
Enterprise value/earnings before interest, taxes, depreciation and amortisation (EV/EBITDA) is the most widely used valuation multiple based on enterprise value to determine the fair market value of a company.
The firm estimated that this year forward earnings per share (EPS) of 61/84 and at the current price, this stock was trading at a trailing P/E of 4.14 times while the forward PE was 5.94 times implying that the stock is currently undervalued.
“A long-term outlook remains excellent given the bank’s move towards digitising its services, improved lending services and strategy to diversify its business,” Tanzania Securities report showed.
Broker forecast performance shows that the bank will continue being more profitable, rising interest income to 729.72bn/- [the actual interest income was 688.61bn/-] last year and increasing further to 799.15bn/- this year.
“This is due to the introduction of new loan products by the bank and expansion of credit into retail markets,” Tanzania Securities said adding: “The increase in interest income will lead to increase in net interest income to 564.34bn/- [actual 570.16bn/-] last year and 616.13bn/-this year.”
The increase, according to the forecast report, will push profit after tax to 122.14bn/- [actual 164.99bn/-] last year and 161.52bn/- this year from 120.14bn/- in 2019.
