SINGAPORE: RHB raised its call for United Overseas Bank (UOB) from “neutral” to “buy” and increased its price target for the bank to S$40.20, up from S$35.60.
The new target price is 10.3 per cent higher than UOB’s latest closing price of S$36.43 and 12.9 per cent higher than RHB’s Nov 11 price target.
According to The Business Times, this upgrade comes as RHB analysts predict a positive 2025 outlook for UOB. While the bank lagged behind its peers over the past 23 months, RHB believes the trend will reverse, with UOB set to outperform the sector.
RHB’s Singapore Research analysts also noted that UOB’s ASEAN-focused portfolio could provide investors with a “defensive shelter to ride through the volatility ahead,” expected after the 2024 US presidential election.
With ASEAN economies having low trade exposure to the US, RHB Global Economics and Market Strategy expects stable-to-stronger economic growth in 2025, driven by continued strength in trade, manufacturing, and tourism.
However, it cautioned that these economies could still be indirectly affected by market volatility through its ties with China.
RHB’s Singapore Research analysts also expect UOB to benefit from its long-term investments in platforms and the Citi acquisition, which are beginning to yield results.
Analysts said some of the benefits were visible in the Q3 2024 results, with UOB’s loan growth of 5% year-on-year (YoY) and a 17% YoY increase in current and savings accounts, outperforming its peers.
Analysts are optimistic about UOB’s outlook for 2025, expecting the bank’s earnings growth to exceed the flat earnings of its peers.
They anticipate a 6% YoY increase in UOB’s profit after tax and minority interests (PATMI) for FY2025, better than the sector’s flat earnings. “On a core basis, we still forecast FY2025 Patmi to rise by 3 per cent,” they said.
They added that the expected increase in PATMI and higher dividend payouts support their forecast of a 9% growth in dividends per share for FY2025.
This week, The Smart Investor also suggested adding UOB to investors’ buy watchlists due to the bank’s rising profits and bright prospects. /TISG
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