FGB Price Estimate Raised at JPMorgan on Dividend Expectation

Investors should buy First Gulf Bank PJSC shares before year end as the lender controlled by Abu Dhabi’s ruling family will offer a 7 percent dividend yield, JPMorgan Chase & Co. said, raising its price estimate.

JPMorgan, which has a buy rating on the stock, increased its price forecast for the Abu Dhabi-based lender’s shares to 13.5 dirhams from 13 dirhams, analysts including Naresh Bilandani said in a report dated Oct. 19. That represents a 36 percent upside from last week’s closing price.

The analysts’ projected dividend yield for First Gulf Bank exceeds the 4.6 percent average for banks traded on the benchmark ADX General Index, according to data compiled by Bloomberg. Shares of First Gulf Bank have rallied 29 percent this year through Oct. 18, compared with a 10 percent advance for the Abu Dhabi gauge and a 13 percent gain for the ADX Banks Index. First Gulf Bank trades at 7.7 times earnings compared with 9.3 times for Abu Dhabi’s measure.

“We see FGB’s current valuation not fully pricing in scope for attractive dividend from this name and we recommend that investors buy FGB shares ahead of year-end” to benefit from the dividend yield, JPMorgan said. “FGB will maintain its strong shareholder value-driven approach and focus on unlocking value by returning capital through higher dividends.”

The lender is set to increase its dividend yield to 7.7 percent in 2013 and 8.9 percent in 2014, according to JPMorgan estimates.

First Gulf Bank may tomorrow report a 10 percent advance in third-quarter profit to 1.01 billion dirhams ($275 million), according to the mean estimate of five analysts compiled by Bloomberg. The bank’s stock was unchanged at 10:32 a.m. in Abu Dhabi today.

Sixteen analysts recommend investors buy the shares, while one has a hold rating on the stock, according to data compiled by Bloomberg.

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