Retail Expansion and Lease Financing help Improve Company’s bottom-line
§ SG-SSB’s agenda of growing its retail business alongside its corporate banking portfolio yielded positive result at the end of the year. Headline figures grew by 20.50% above its FY07 figure to record GH˘ 78.29million. Over the same period, the Company grew its interest income by 12.24% with fees and commission also growing by 54.23%. A 49.27% decline in other operating income however could not hurt the company’s bottom-line, as earnings after tax grew by 33.93% to report a per share value of GH˘ 0.109.
§ During FY08, the Company’s bottom-line recorded a 33.93% growth, which was reinforced by a 12.24% and 54.23% surge in interest income and fees and commission respectively. Despite the growth trends, operating expenses increased by 17.10% over FY07 resulting in an operating expense ratio of 55.03%.
§ Total operating expenses increased at the end of the period by 17.10% over its figure a year ago to record GH˘ 43.09 million. The company’s expense ratio however showed a marginal decline, reducing from 63.64% in FY07 to 60.39% in FY08. Though the company made enough effort to scale down its expense ratio, we still believe there could be a further decline since the current expense ratio is still above the industry average.
§ The company’s current financial position indicates a major turnaround in its fortunes. This solid turnaround in revenue is supported firmly by the reinforcement of its retail banking arm and the introduction of its finance leasing arm to shore up its earnings. Going forward, the company hopes to strengthen and build capacity in its marketing and sales department while implementing an aggressive communication strategy to improve upon it’s market share.
§ With the current effective controls at treasury aimed at bolstering the its liquidity position and the continual decline in the company’s expense ratios. We believe these efforts will help improve earnings whiles suffocating cost will undoubtedly be translated into a stronger bottom-line. With a trailing P/E of 10.37x and a forward P/E of 8.08x we believe in the potential upside of the stock in the medium term. We therefore initiate coverage of SG-SSB with a 2-HOLD medium risk rating and a 12-month fair value price target of GH˘ 0.60.
