The target price was derived with the assumptions of a 16 per cent sustainable return on equity, 4 per cent long-term growth, and 9.4 per cent cost of equity.
"Our view on Hong Leong Bank is independent of whether it successfully acquires EON Capital Bhd," HwangDBS wrote in a report yesterday after Hong Leong announced its results for the second quarter ended on December 31 2009.
The stockbroker believes that the growth potential could speed up at Bank of Chengdu in China, which is a 20 per cent associate of Hong Leong.
Hong Leong recently entered into a joint venture (49 per cent stake) with the Chinese bank to operate a licensed finance company in China.
"The venture could add to contribution from its Chinese operations. Its maiden venture in Vietnam has also commenced operations and is expected to contribute positively in two to three years," HwangDBS noted.
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