Brazilian stock report - Banco Bradesco preference

BRAZ

Banco Bradesco Preference Shares hits four-month high on firm volume January 19, 2018 18:00 BRST

NEWS BITES - BRIC

Banco Bradesco SA (SA:BBDC4), Brazil's 4th largest Bank by market cap, traded at its 98-day high of R$37.24. The preference stock price has increased 26.0 centavos (0.7%) from its last trading session of January 18 to close at R$37.11. Compared with the Brazil Index 50 which rose 39.0 points (0.3%) in the day, the relative price increase was 0.4%. The rise has been propped up by firm volume of 1.2 times the average daily volume of 9.4 million preference shares.

Highlights in today's Report:

SECTION 1 BULLISH SIGNALS

Fundamentals, Undervaluation [compared with sector average], Technicals, High Performance Indicators

SECTION 2 BEARISH SIGNALS

Fundamentals, Technicals, Overbought/Bearish/Resistance Signals, Low Performance Indicators

SECTION 3 PRICE VOLUME DYNAMICS

Momentum, Moving Annual Return, Beta & Alpha, Turnover Rate & Turnover Period

SECTION 4 RANKING

Global, Independent Ratings

SECTION 5 FINANCIALS

Financials Summary, Annual Report for the year ended December 31, 2016 (year-on-year comparisons with previous corresponding period)-, Trailing 12 Months Dividends

SECTION 6 PROFILE

Activities, Industry & Sector, Top Management, Issued Capital

SECTION 7 STOCK BUZZ

SECTION 1 BANCO BRADESCO PREFERENCE SHARES BULLISH SIGNALS

1.1 Fundamentals:

+ The P/E of 13.9 multiplied by the P/NTA of 1.4 is 18.7. Being less than the Benjamin Graham benchmark of 22.5 the preference stock appears undervalued.

+ The relative yield of the preference stock, defined by its yield of 3.4%, divided by average yield of dividend yielding stocks in the Brazil Index 50 of 2.3% is 147.6%. This suggests the preference stock is undervalued in dividend yield terms.

+ The company is cash rich with Cash to Market Capitalisation at 64.7%.

+ Net profit margin has averaged 13.6% in the last 3 years. This is better than the sector average of 10.8% and suggests a high margin of safety.

+ As per the Du Pont analysis, Return on Equity of 15.0% is better than sector average of 13.3%. This is computed as net profit margin of 12.7% times asset turnover [sales/assets] of 0.17 times leverage factor [total assets/shareholders' equity] of 11.7.

1.2 Undervaluation [compared with sector average]:

+ Price to Book of 1.4 [1.5]. We estimate Banco Bradesco Preference Shares preference stock is trading at a current year Price to Book of 1.3 and a forward year Price to Book of 1.2.

+ Return on Equity 15.0% [13.1%].

1.3 Technicals:

+ The price climbed 4.5% in the last week and soared 13.5% in the last month.

+ Compared with the Brazil Index 50 which rose 2.5% for the week and 12.2% for the month, this represented a relative price increase for Banco Bradesco Preference Shares preference stock of 2.1% for the week and 1.3% for the month.

+ The Moving Average Convergence Divergence (MACD) indicator of 12-day Exponential Moving Average (EMA) of 35.85 minus the 26-day EMA of 35.03 is positive 0.83 suggesting a bullish signal. Both EMA prices are rising, another bullish signal.

+ Rises to Falls: in the past month the number of rises outnumbered falls 14:6 or 2.3:1.

+ The present value of R$1,000 (PV1000) invested one year ago in Banco Bradesco Preference Shares is R$1,362, comprising a capital gain of R$311 and dividend reinvested of R$51.

PV10001-week1-month1-year
BBDC4.SA1,0451,1641,362
Brazil Index 501,0251,0671,281

+ The present value of BRL1,000 (PV1000) invested ten years ago in Banco Bradesco Preference Shares is R$2,399, including a capital gain of R$864 and dividend reinvested of R$535.

+ 10 years Multiplier in BRL = 2.399x

+ Compound Annual Growth Rate (CAGR) in BRL = 9.1%

Present Value of USD1,000 invested 10 years ago:

+ The present value of USD1,000 (PV1000) invested ten years ago in Banco Bradesco Preference Shares is $US1,323, including a capital gain of $US28 and dividend reinvested of $US295.

+ 10 years ago BRL 1 equalled USD 0.5656

+ 10 years Multiplier in USD = 1.323x

+ Compound Annual Growth Rate (CAGR) in USD = 2.8%

Jan 19, 2018: USD 1 equals BRL 3.21

1.4 High Performance Indicators:

DescriptionValueRank In Market
Today's TurnoverR$405.2 million (US$126.4 million)In Top 2%
EBITDA Margin %75.7In Top Quartile
Price/MAP501.09In Top Quartile
Volatility %1.6In Top Quartile

SECTION 2 BANCO BRADESCO PREFERENCE SHARES BEARISH SIGNALS

2.1 Fundamentals:

Overvaluation [compared with sector average]:

+ Price/Earnings of 13.9 [7.8]. We estimate Banco Bradesco Preference Shares preference stock is trading at a current year P/E of 7.5 and a forward year P/E of 7.4.

2.2 Technicals:

+ The 0.7% discount to 12-month high of R$37.37 against the 46.4% premium to 12-month low of R$25.35 suggests the climb might be peaking.

2.3 Overbought/Bearish/Resistance Signals:

+ The Relative Strength Index (RSI) of 84.2 has penetrated the overbought line of 70, suggesting the price gain of 7.3% in the last 14 days is unusually high.

+ The preference stock is overbought according to the Williams % R indicator of -4.0, suggesting the price is close to its 14-day high of R$37.24.

+ The Money Flow Index [MFI] is 86.3 suggesting an overbought 14-day trend, being above 80. The Money Ratio of 6.3 suggests positive money flow was 6.3 times negative money flow.

2.4 Low Performance Indicators:

DescriptionValueRank In Market
Total Debt to Equity4.9In Bottom 7%
Return on Assets [ROA] %1.3In Bottom Quartile

SECTION 3 PRICE VOLUME DYNAMICS

3.1 Momentum:

+ Volume: there were 10,920,000 preference shares worth R$405.2 million (US$126.4 million) traded today. In the past week, volume was 0.9 times average and the preference shares were up 4.5%.

3.2 Moving Annual Return

Based on a dynamic start date of 5 years ago, the Moving Annual Return has been positive in 3 of the last 5 years. An investment a year ago in BBDC4 would have produced a return of 35.5%.

BBDC4Close (BRL)Dividends (BRL)Capital Gain / (Loss) %% YieldAnnual Return %
Jan 1937.111.2431.14.435.5
1 Yr ago28.311.2110.28.9119.1
2 Yrs ago13.471.15(37.4)5.3(32.1)
3 Yrs ago21.520.9135.35.741.0
4 Yrs ago15.910.6(19.5)3(16.5)

Close 5 years ago R$19.77

3.3 Beta & Alpha:

+ Beta: the Beta of Banco Bradesco Preference Shares preference stock is 1.4. A Beta greater than 1 suggests this is a high risk, high return preference stock with volatility greater than that of the market.

+ Alpha: the Alpha of the preference stock is -9.4. The actual return of 25.79% fell short of the expected return of 35.2%, reflecting underperformance.

3.4 Turnover Rate & Turnover Period:

+ The turnover rate in the 12 months to date was 64.8% (or a turnover period of 1 year 6 months). This average length of ownership of the preference stock at 0.9 times the average holding period of 1 year 9 months for preference stocks in the Brazil Index 50 suggests a larger number of speculators on the share register, making it less safe for long-term investors.

SECTION 4 RANKING

4.1 Global Rank [out of 47,420 stocks] and Rank in the American Region [out of 12,007 stocks]

DescriptionValueGlobal RankIn Am Region
MCap (US$)35.3B441207
Total Assets (US$)365.9B212104
Revenue (US$)62.7B15851
Net Profit (US$)4.7B207109
Return on Equity %15.07,5311,482
Net Profit Margin %12.79,2682,160
Price to Book1.314,1432,382
Price/Earnings13.87,1761,212
Yield %3.47,3861,997
PV$1000 (1Year) US$*1,36513,6132,733
US$* Change (1Year) %28.714,3282,937

* 1 year ago USD 1 = BRL 3.23

Jan 19, 2018: USD 1 equals BRL 3.21

4.2 Independent Ratings

+ BSS/News Bites:

Banco Bradesco SA is placed 114/265 in BSS News Bites' ranking of Brazilian performers in the past year, a percentile ranking of 57.

+ Vanguard Total World Stock ETF 7457:

The stock was one of 7457 global stocks selected by Vanguard Total World Stock ETF (VT). As at November 30, 2017, the Vanguard Total World Stock ETF held 302,856 shares worth $US3,123,511 or 0.02% by value of the ETF's portfolio [Ranked 809 out of 7457 by value and 6 out of 121 for Brazil].

SECTION 5 BANCO BRADESCO PREFERENCE SHARES FINANCIALS

5.1 Financials Summary

Year endedDec 2016Dec 2015Dec 2014
Sales (USD B)62.847.532.3
Pretax (USD B)8.436
Net (USD B)4.75.64.8
EPS (BRL)2.67663.11822.3967

Net profit was down 16.8% from US$5.6 billion in 2015 to US$4.7 billion in 2016. Earnings Per Share (EPS) was down 14.2% from R$3.12 to R$2.68.

5.2 Annual Report for the year ended December 31, 2016 (year-on-year comparisons with previous corresponding period)-

Favourable Changes:

+ Total income up 32.3% from BRL152.7b ($US38.3b) to BRL202.0b ($US62.1b).

+ Total income to total assets up from 0.1 to 0.2.

+ Deposits up 19.5% to BRL235.5b ($US72.4b).

+ Net Loans up 2.2% to BRL312.7b ($US96.1b).

Unfavourable Changes:

+ Net profit down 16.8% from BRL18.1b ($US4.6b) to BRL15.1b ($US4.6b)

+ EPS down 14.3% from BRL3.43 (US86.12c) to BRL2.94 (US90.5c).

+ Return on Equity down from 18.9% to 15%.

+ Tier 1 Ratio down from 12.7% to 12%.

+ Tier 2 Ratio down from 4.1% to 3.4%.

+ Non-Performing loans to Net loans improved from 7.94% to 5.63%.

Note:

+ Net tangible assets per share steady at BRL15.2 ($US4.7).

5.3 Trailing 12 Months Dividends

Trailing 12 Months ToValue (centavos)
19 Jan 2018124.22
19 Jan 2017120.27
19 Jan 2016114.86
19 Jan 201590.77
19 Jan 201460.13

SECTION 6 BANCO BRADESCO PREFERENCE SHARES PROFILE

6.1 Activities

Banco Bradesco S.A. attracts deposits and offers commercial banking services. The Bank offers business loans, personal credit, mortgages, lease financing, mutual funds, securities brokerage, and Internet banking services. Bradesco operates in Brazil and Argentina, the United States, the Cayman Islands, and the United Kingdom. Bradesco offers credit cards, insurance, and pension funds.

6.2 Industry & Sector

Classification LevelName of Sector
Business SectorBanking & Investment Services
Industry GroupBanking Services
IndustryBanks
Economic SectorFinancials

6.3 Top Management

The chief executive officer is Luiz Carlos Trabuco Cappi.

6.4 Issued Capital

Based on 3,054,480,793 issued shares the market capitalisation is R$113.4 billion (US$35.3 billion).

SECTION 7 STOCK BUZZ

Corporate Wire

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January 08: Banco Bradesco Preference Shares announces dividend

Banco Bradesco Preference Shares today announced a cash dividend of 1.90 centavos per share. The ex dividend date is Wednesday, January 03, 2018 and the record date is Tuesday, January 02, 2018 and it is payable on Thursday, February 01.

December 04 2017: Banco Bradesco Preference Shares announces dividend

Banco Bradesco Preference Shares today announced a cash dividend of 1.90 centavos per share. The ex dividend date is Monday, December 04 and the record date is Friday, December 01, 2017 and it is payable on Tuesday, January 02, 2018.

November 06 2017: Banco Bradesco Preference Shares announces dividend

Banco Bradesco Preference Shares today announced a cash dividend of 1.90 centavos per share. The ex dividend date is Thursday, November 02, 2017 and the record date is Wednesday, November 01, 2017 and it is payable on Friday, December 01.

October 09 2017: Banco Bradesco Preference Shares announces dividend

Banco Bradesco Preference Shares today announced a cash dividend of 1.90 centavos per share. The ex dividend date is Tuesday, October 03, 2017 and the record date is Monday, October 02, 2017 and it is payable on Wednesday, November 01.

September 04 2017: Banco Bradesco Preference Shares announces dividend

Banco Bradesco Preference Shares today announced a cash dividend of 1.90 centavos per share. The ex dividend date is Monday, September 04, 2017 and the record date is Friday, September 01, 2017 and it is payable on Monday, October 02.

Contact: (11)3684 3749

Physical Address: Cidade de Deus s/n Vila Yara Osasco, SP 06029-900 Brazil

State/Province/Country: Brazil

Country of Incorporation: Brazil

Exchange: BM&F BOVESPA

ISIN: BRBBDCACNPR8

SA:BBDC4; SAO:BBDC4; BZ:BBDC4; BBDC4.SA

PermID: 5035095906

Banco Bradesco S.A.

Source: www.BuySellSignals.com