Anglo took the market by storm on Tuesday after a 33% surge in full-year profits to 346 million and Davy Stockbrokers banking analyst Scott Rankin has placed a 13.50 target on the shares which opened at 10.85 yesterday.
“Our 12-month share price target is also being raised to 1,350c, which is 24% above the current price. This represents a forward PE of just over 12x one year out, ie based on our September 2005 EPS forecast,” said Mr Rankin in a note to clients.
NCB’s John Kelly is maintaining their buy forecast on the shares and is optimistic about its long-term growth.
“Our price target remains 12.5 based on 12x 2004E earnings, although rolling this forward to the following year would suggest eventual upside of closer 14 per share. Our recommendation remains buy.
“Anglo retains its ability to translate lending growth into EPS growth.
“Revenues should grow well in excess of cost growth and its dividend growth will remain above average. On its current rating of 10.9x 2004E earnings, the stock remains very attractive,” he said. Goodbody Stockbrokers’ Len Riddell said they retain their buy recommendation and raised their price target to 13 following what he described as “blowout” results.
Mr Riddell said that following such solid upgrades, the key issue for Anglo is whether the stock can retain the rating it has been afforded in recent weeks. “The stock currently trades on 10.5x, our revised ’04 estimate. This appears very undemanding given the earnings visibility and momentum over the next few years,” he said, answering his own question.
Meanwhile, Dolmen Securities Stuart Draper has placed a 14 target on AIB shares in advance of a trading statement from the bank next week.
Mr Draper believes their is hidden value in the share pointing out that M&T Bank in the US in which AIB has a 22.5% stake, recently reported impressive third-quarter results.
He said strong loan growth and robust credit quality delivered 19% year on year EPS growth, helped the M&T share price to recently reach an all-time high. “When the value of this US investment and AIB’s Bank Zachodni WBK shareholding in Poland are excluded, the Irish bank’s Irish and British operations are now only trading at c.9x current year earnings.
“This does not fairly reflect the continued high single-digit underlying growth potential of these operations,” he said.
Anticipating the content of next week’s trading statement, Mr Draper said: “given the relative strength of the two major economies in which it operates, Ireland and the UK, as well as the economic recovery now underway for both its US and Polish operations, this trading update is likely to be quite buoyant.”