Diamond Trust Bank, Rights Issue Report, July 2014

Recommendation: BUY
We issue a Buy recommendation on Diamond Trust Bank (DTB) based on a 1 year target price of KES 264.00, representing 60.0% upside from the Rights Issue price of KES 165.00. Our positive sentiments are supported by sound balance sheet growth (3 year CAGR of 22.0% to FY16F), driven by sturdy loan book and customer deposit growth (3 year CAGR) of 22.7% and 21.4% to FY16F respectively. We expect sustained cost management meas-ures to drive stability in the cost-to-income ratio going forward, with a 3 year CTI average of 40.7% to FY16F. We expect this to translate to +12.0% y/y growth in EPS to KES 24.20 in FY14, owing to dilution from the Rights Issue. (+23.2% y/y EPS growth in FY14F, like for like comparison)


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