In this week’s content analysis (see attached) we’ll be taking a closer look at Credicorp Ltd (BAP), which we added to our ADR model portfolio on its latest rebalancing date this Monday, February 2nd. Credicorp is a Peru-based holding company, operating primarily in the commercial banking space through its five main subsidiaries (http://phx.corporate-ir.net/phoenix.zhtml?c=97944&p=irol-irhome). 
Download
Starting with an analysis of the company’s current valuation, we find that the market has historically valued the company at prices very close to our own StockPointer intrinsic value. The tight correlation here between the EVA model’s computations and Credicorp’s actual pricing over time increases the confidence we have in using intrinsic value as a measurement. Over the past 5 years, the average P/IV ratio was 1.02; it was at 1.01 as of January 30th. Intrinsic value has a long-term trend which is both stable and increasing, supported by a high return on capital (19.7% over the past 12 months) and a well-managed cost of capital. A current FGV/EV of 10.3% indicates a fairly reasonable premium to pay relative to the company’s future growth value. This premium seems particularly affordable when noting that, over the past 5 years, Credicorp has maintained an average growth rate on its current operating value (COV) of around 20%. For other companies that don’t offer any growth in their current operating value, a 10.3% premium might have been considered too rich.
As for BAP’s economic performance, while EVA dropped from June 2013 to December 2013, it recovered, has grown sharply since, and is now back in line with its overall 5 year trend—a smooth, growing increase in EVA.
