Andhra Bank has a Current P/BV of 0.39 and is one of the few PSU banks which has maintained a positive P&L consistently .
The lowest P/BV seen has been around 0.28 , basis which the lower end of the range shifts towards 37.40 . The Higher range shifts towards 0.40 to 0.65 times P/BV which portends to a price range between 53.42 to 86.81 .
For passive investors a capital allocation of 40% at current price and then averaging towards as close 37.40 with a view to sell into the higher range ina a few months seems a prudent strategy for a greater than 12% return per annum.
Leveraged aggressive investors who are comfortable with running draw downs and options , a strategy could be at the right price levels to build positions in out of the money puts while going long the futures with an objective to rollover positions to exit at a higher end of the price range over the coming months ;while controlling the leverage ratio .In case of a drastic quick fall the options should provide a bit of cushion.
The underlying will be volatile and is very prone to large fast moves since the free float market cap is only around 1290 crores. Fundamentally the stock is better placed than peers most of whom are at multiples of greater than 0.45 times book value. The below table compares a few peers .
|Andhra Bank||Central Bank of India||Dena Bank||Oriental Bank of Commerce|
|Book Value/ Share||133.56||71.07||64.97||351.85|
|M Cap ( crs)||3,590||18,070||2,428||4,407|
|Free) Float M cap ( crs)||1,290||2,530||850||1,807|
|Shareholding Pattern( Jun 17)%|
|FY17 operating Profit||4,388||3,089||1,390||4,170|
|FY 17 PAT||174||-2,439||-132||-1082|
|NIM FY 17||3.07%||2.51%||2.00%||2.42%|
|Total NPAS||17,670 (12.25%)|| 27,251
|PCR FY 17||51.03%||58.43%||50.56%||53.61%|
|Jun 17 Operating profit||1,369||451||288||1008|
|Jun 17 PAT||40||-577||-132||-486|
|NIM Jun 17||3.12%||1.95%||2.44%||2.19%|
|Total Assets Jun 17||1,45,801||1,72,198||74,807||1,64,577|
|Total NPAs Jun 17||13,509
|PCR Jun 17||51.73%||54.48%||51.72%||54.68%|
|CET 1 Jun 17||7.45%||6.17%||9.19%( maybe inc addtnl)||7.24%|
|Additional Tier 1 Jun 17||1.44%||1.29%|
|Tier II Jun 17||3.09%||3.74%||2.46%||2.72%|
|Total CRAR Jun 17||11.98%||9.91%||11.65%||11.25%|
|Branches ( Jun 17 )||2,908||4,716||1,874||2,376|
Disclaimer : This is not investment advice but a generic article for reading purposes. Readers are strongly encouraged to verify facts and seek opinions of registered financial advisors. At any point of time FFSPL may or may not have positions in asset classes/ specific assets , being or not being contents of this publication/presentation/article.