Sell Yes Bank Target Rs. 650 (50% Downside): UBS

Discussion in 'Ask A Query About Your Stock Picks And Portfolio' started by Michael Gonsalves, Sep 16, 2016.

  1. Michael Gonsalves

    Michael Gonsalves Member Staff Member

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    UBS has maintained a sell rating on Yes Bank, but revised its estimates of 12-month target price by nearly 50 per cent to Rs 650. Yes Bank shares closed at Rs 1,221 on Thursday.

    Here are the top four factors behind the UBS move:

    Corporate fees and trading gains seem unsustainable: In Q1 of FY17, Yes Bank reported a big increase in non-interest income, supported by investment gains and corporate banking fees.

    "Our analysis of loan approval documents from a sample of 200 companies indicates that Yes Bank's lending rates are 50-200bp lower than that of the next lender to the same corporate," said the UBS report.

    This could be due to Yes Bank booking a higher share of revenue as fees than net interest income (NII). In the sample cases, UBS observed, it is possible to book fees equivalent to 2-12% of new loans, based on tenor and difference in lending rates. However, the new accounting standards (effective 2018-19) would require banks to amortise these types of fees

    RBI's AQR suggests a beginning, not the end: Yes Bank may have better structuring capabilities than other Indian banks; however, current NPLs appear unsustainably low, as per UBS study.

    Private sector lenders reported 7-20 per cent of their loan books as impaired loans, above the percentage in the UBS deep dive study (Deep dive into lending) and significantly higher than the cases identified under RBI's asset quality review (AQR).

    This suggests to us that the AQR is the beginning of the NPL recognition cycle, not the end. "We think risk of a sharp rise in NPLs persists. We continue to expect above 110bp loan loss provisions in FY17-18," the report said.

    Normalised ROE would be 15% in FY16: As per UBS analysis, Yes Bank's return on equity (ROE) would have been close to 15 per cent in FY16 and not 20 per cent which was reported at normalised profits.

    The estimate is made assuming 35 per cent lower corporate banking fees; investment gains at the past three-year average; and a credit cost of 100bp. "Our FY17/FY18 PAT estimates are 16%/29% below consensus," said the report.

    UBS lowers EPS estimates: UBS lowered their FY18 EPS estimate by 11 per cent as the investment bank reduced its fee estimates.

    "We continue to believe NPL provisions are unsustainably low and expect provisions to increase, although the timing is uncertain. Given strong share price performance and relatively high valuations, we think higher NPL provisioning could lead to a significant correction of the stock," UBS said in a report.

    Source: ET
     
  2. kharb

    kharb Well-Known Member

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    UBS recommendation will fall flat on its face. Bank income tax out go in ending Sept is substantial higher YOY and QOQ. No doubt stock has some well deserving correction due to sudden rise and may correct further slightly more , but stock will continue to be among top performers in banking. This is only bank which has done well on both sides, corporate lending as well as retail lending.
     
    Last edited: Sep 16, 2016
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  3. saturn

    saturn Member

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    Brave of you to debunk the recommendation. Btw how much higher is the bank's tax outgo Sept installment?
     
  4. kharb

    kharb Well-Known Member

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    Yes bank Sept Advance tax is 400 Crore against 285 Crore last year, up 43%. It can be considered as lead indicater of coming Sept ending quarter results . So present correction in the Stock is normal, but it is definitely a four digit stock at present level of market. Every thing including failed QIP at very high price will go under carpet after declaration of Sept ending quarter results . After two more quarter results , I expect bank to do QIP at very good level.
     
    Last edited: Sep 17, 2016
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  5. kharb

    kharb Well-Known Member

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    Yes bank reversal in direction to positive( since sell call of price by UBS 650 target) is loud and clear way of telling by the Yes Bank Stock that it don't care Baseless Calls. Yesterday BOAML and D B gives new targets of 1590and 1400.These are many domestic brokerage who had also come out with similar postive calls. These calls are nothing more but to Chide UBS for it Baseless Sell Call. Now biggest responsibility to prove UBS call as totally wrong is on management of Yes bank. They should show really impressive performance to show all those wrong , including those who did not invest in QIP or UBS who just could not resist of giving a wrong call just on a failure of QIP, all targets must be in line with company performance not because of failure in a QIP as management refused to lower the price. In my view Rana Kapoor refusal to lower the price to make QIP successful, shows his confidence in his bank.
     
    Last edited: Sep 22, 2016
  6. kharb

    kharb Well-Known Member

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    Yes bank crossed 1270 ,I feel UBS might have forget to write 1 before their target of 650.So very small mistake:) and it may be heading to 1650 in due course.
     
  7. vij

    vij Member

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    BS from UBS :p
     
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  8. kharb

    kharb Well-Known Member

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    Yes bank crosses 1300, I hope UBS analyst must have seen the result of his sell call, which have fallen flat on his face as I declared on same day.
     
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  9. kharb

    kharb Well-Known Member

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    Yes bank profit up 31.5% yoy, 801 crore. Good set of numbers beaten all estimates . Stock is up.
     
    Last edited: Oct 20, 2016
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  10. Srouta Mukherjee

    Srouta Mukherjee Well-Known Member

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    Big blunder is there by UBS Analyst. He must be sacked immediately for such foolish call of sell. For what he is getting salary? He says target price is Rs. 650 :mad:
     
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  11. kharb

    kharb Well-Known Member

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    Brokerages are positive on Yes Bank. Targets are Jefferies 1615,BofAML 1590,GS 1574,Nomura 1510,HSBC 1509,JP Morgan and Axis cap 1500.DB 1450.:). And UBS 650 (joke of the year in my view):).
     
    Last edited: Oct 22, 2016
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  12. saturn

    saturn Member

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    @kharb , and would you be kind enough to also share the brokerages view on your other favourite RIL?
     
  13. kharb

    kharb Well-Known Member

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    Views on RIL for one year-CLSA 1350. D D Sharma -1500.I am positive on RIL among megacap.If I just talk on my rough estimates RIL present profits are due to its 40 % investments and roughly 60% investments are like NPA of banks like Rel Retail, Rel Jio, oil and gas exploration and many more. In my view many of these NPA will turn positive in next two to three years with investment cycle already peaked. So this expected jump in cash flows is the reason of my positive views. If RIL does not perform now and will not double in next three or four years, then there will be end game for RIL from stock market, with even very long term loyal investers also looking for final exit. I hope both Rel brothers have some solid plan to reward share holders.
     
    Last edited: Oct 22, 2016
  14. saturn

    saturn Member

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    Interesting step back by you (from the earlier RIL is the next best thing) when you mention that RIL and both brothers need to get their act together else its end game for RIL. Things are hunky dory out there is it?

    And just to complete the picture

    Goldman Sach 1180 (upside 8%), BofA-ML 1165 (upside 7%),

    infact when I saw the article on moneycontrol which covered both Yes and RIL, I knew you would be posting. You are getting predictable bro.
     
    Last edited: Oct 22, 2016
  15. kharb

    kharb Well-Known Member

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    My views on RIL remains same, I had maintained that I am positive on RIL among mega large caps as its large investments will start giving returns and cheap valuations due to past under performance.So I am of the view that RIL will out perform Nifty for next few years and help Nifty to hit new all time highs.
     
    Last edited: Oct 22, 2016
  16. saturn

    saturn Member

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    I just brought back my post in its original form...with no deletions

    So nothing to say about the portion in bold? Is it in your words another joke by two more Brokerages : a measily uptick of 7% and 8%?

    And playing it save by saying " If RIL does not perform now and will not double in next three or four years, then there will be end game for RIL from stock market," are you?
     
  17. kharb

    kharb Well-Known Member

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    UBS had given target of 650.I had at that time called that call as rubbish .Now Yes bank QIP is already filled by 2 .5 time at around 1500 (1498.50) exactly as predicted in my above post(Earlier QIP failed at 1350 to1400 ) and QIP bidder ends up paying higher rate and at stronger rupee .I am ready to give free coaching(just a joke so that reputed houses and analyst calls have more depth to help investers) to that knowledgeable respected UBS analyst or any more analysts who endorsed him (if they are still on job),who predicted 650 for Yes Bank
     
    Last edited: Mar 24, 2017
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  18. Srouta Mukherjee

    Srouta Mukherjee Well-Known Member

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    100% agreed total bogus advise of UBS. How they can give such rubbish recommendations. Even CLSA is useless. Such advisory should be immediately dismissed IMHO :-\
     
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  19. kharb

    kharb Well-Known Member

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    Yes Bank has alloted 3.27 crore shares at 1500 Rs per share in QIP,well above Failed last QIP range of 1350 to 1400 . I had estimated this six month back in my post above.All bidder could not be alloted at 1500 ,as there was many time demand.Congratulations to Mr Rana Kapoor CEO of Yes bank,entire management of the bank for creating wealth for share holder.Wish they keep on creating wealth like this and all small share holders are solidly behind management.Yes Bank happens to be having maximum weight in my portfolio.
     
    Last edited: Mar 30, 2017
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  20. shakti khanduri

    shakti khanduri Active Member

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    @kharb ,Congratulations for your in the huge money investments.I am sure you have that knack, but can you explain how do you find them explaining your strategy,time horizon etc? I consider you one of the best investor from this forum.Which investment strategy works better - value or growth?
     
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