Since the start of 2008, URSA Bank preferred shares have shed more than 90% of their value, while the expected dividend yield on the shares has increased to 46%. According to our estimates, investors overestimate the risks involved in the bank’s preferred shares, fully identifying them with the risks of the bank itself. In our view, this approach is not quite correct, as it fails to adequately estimate the investment opportunities associated with the bank.
We have used the bank’s current required rate of return of 33.3% as a base DDF rate. With fixed dividend payouts, the target price of URSA Bank prefs as of late 2008 is USD 0.29 per share, with a 64% upside potential.
| Discount rate | 10.0% | 15.0% | 20.0% | 25.0% | 30.0% | 33.3% | 40.0% |
|---|
| Fair price | 0.86 | 0.59 | 0.45 | 0.37 | 0.31 | 0.29 | 0.25 |
| Upside | 389% | 235% | 157% | 111% | 80% | 64% | 41% |
Vladimir Sergievskiy
* Short overviews of equity research reports and sector reports are posted on the website http://www.finamrus.com with a 1-day delay after their full versions are emailed to the company’s clients. To get overviews on the day of their release, please contact your manager at Finam to sign up for full versions of research reports.
Sector:
Financial sector
All Research Notes >>
0.244
0.616
