Global financial major Merrill Lynch raises price objective for Gulf Finance House stock

While it strongly maintained its 'Buy' recommendation for Gulf Finance House (GFH) stock, raising the 12 month price objective from $37 to $46 per GDR and $4.6 on the Bahrain listed local shares.

Merrill Lynch's report comments that "Our upgrade is based on continued delivery of new projects, a macro re-rating across the Gulf and greater investor conviction in the MENA infrastructure boom (stronger for longer). With GFH offering investors exposure to two of the fastest growing businesses in the Middle East namely, "mega-project" development and Shari'ah-compliant investing, we foresee the Bank maintaining its strong track record, through its secular themes, playing out well into the end of this decade."

The report also said, "We expect earnings growth of 62% in 2007E to be in excess of the stocks' 41% rise last year. We take greater comfort in the strength of the development infrastructure pipeline, following management delivery on new high-profile projects".

Commenting on Merrill Lynch's recommendation on the GFH stock, Mr Peter Panayiotou, Acting Chief Executive Officer, GFH, said: "The raised price objective by Merrill Lynch reflects a belief in our sustained delivery in the sector as well as the region. As a result, the implied PE ratio in the report was raised to 7.0 in 2008 from 5.6 and to 5.9 in 2009 from 4.7 targets. Also Price to Book is projected to increased to 3.2 from 2.6 in 2008 and 2.5 from 2.0 to in 2007. This is indeed a remarkable development not only based on the fundamentals but due to the fact that GFH is still an under-followed stock now "catching up" based on continued earnings growth, news flow catalysts, and dividends."

The developments come shortly after Merrill Lynch discarded its wait and see approach on the GFH stock, gave GFH full credit for continued progress and declared it as a classic 'frontier stock' on the verge of mainstream.