GulfBase GCC Cap Indices
Large Cap3,991 -0.08
Med Cap3,831 -0.01
Small Cap4,863 -0.26
Micro Cap8,466 0.09

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Ticker Price Volume
GFH 0.49 1,642,170
QNBK 133.5 133,285
AMLAK 1.07 4,593,610
DSI 0.37 10,758,890
SABIC 97.69 2,746,187
BKMB 0.37 624,000
AIRARABIA 1.13 3,611,365

Bank Muscat

Source: Oman Arab Bank

Bank’s net interest income (NII) of RO 43.7mn in Q2’10, falls 4% short of our quarterly estimates. Compared to previous quarter, NII declined by 1.5% in Q2’10, while on annual basis it remained flattish. In Q2’10 non-interest income of RO 16.5mn was 4.6% lower compared to Q1’10 figures. Cost-to-income ratio was high at 41% in Q2’10 (as against 40% in Q1’10 and 26.7% in Q2’10). As expected, Bank Muscat’s provisions for credit losses fell by 24% q-o-q to RO 8.9mn in Q2’10. But RO 4.4mn losses from BMI in Q2’10 came as a negative surprise, which together with sluggish operating profit resulted in 8% q-o-q decline in net profit to RO 22.5mn in Q2’10.

We have used ‘Residual Income Approach’, where target price is ascertained based on intrinsic value of bank. Based on our revised estimates, we cut our target price from RO 1.120 to RO 0.982 per share (with an upside potential of 14%). Since currently on relative valuation basis stocks looks attractive and being market leader has a better growth potential considering reviving macro economic backdrop, we maintain BUY rating on Bank Muscat.

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