UOB cuts Hong Leong Finance target price

Stock Name: HL Fin
Company Name: HONG LEONG FINANCE LIMITED

Research House: UOB KayHian

Price Call: BUY

Target Price: 3.15

UOB Kay Hian has cut its target price for Singapore bank Hong Leong Finance (HLSF.SI) to $3.15 from $3.24 and kept its buy rating.

UOB has cut its target price for Hong Leong Finance to account for its lacklustre earnings in the first half of the year. It said it expects the finance company’s net profit to decline 18.6% in 2011 due to net interest margin compression.

Hong Leong Finance’s net interest income fell 16.4% year-on-year to $83.3 million in the first half as margins were squeezed, UOB said.

Competition and structural changes in the financial services industry has shifted Hong Leong Finance’s return on equity to 6% from 8%, the brokerage said.

However, UOB has maintained its buy rating on the stock due to its defensive qualities and an attractive dividend yield of 5%.

 

At 10:14 A.M., shares of Hong Leong Finance were 0.42% lower at $2.39. They have fallen 21% since the start of the year.