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Categories
| RHB maintains outperform on Public Bank |
| Business & Market 2009 | |||
| Written by Financial Daily | |||
| Thursday, 16 July 2009 11:49 | |||
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“With investors’ focus switching to 2010 earnings prospects, we believe its (Public Bank) 1H09 share price underperformance should reverse with upward bias in 2H09. Concerns (capital, dividend payout and maintaining high return on equity) that have weighed down on its 1H09 share price performance have been overplayed and are likely to be the catalyst for share price performance in 2H09,” it said. “Moreover, it now has the largest weighting in FBM KLCI. Coupled with historically low foreign shareholding, any increase in weighting on Malaysia will see Public Bank as one of the leaders to take the market to higher grounds,” it added. RHB Research said the bank’s upcoming second-quarter results (2QFY09) should be at least flat quarter-on-quarter or with 1HFY09 slightly ahead of its expectations. “Loan growth is on track to hit its target of 15% year-on-year (y-o-y) and contributions from its mutual fund/wealth management operations are higher sequentially due to the rally in the equity market. These would more than offset pressure on net interest margin and higher loan-loss provision,” it said. The bank is slated to release its 2QFY09 results later this week. The local research house noted that FY09 dividend will come from operations plus proceeds from selling its treasury shares (via  open market or placement). “It can be more active in FY2010 capital management (or at least revert to all cash dividend) given the positive impact on capital ratios from the recent RM1.2 billion hybrid issue and FY09 retained earnings (ex dividend payment) as well as positive impact from FRS 139 and Basel II IRB approach,” it said. RHB Research continued to like the banking stock for its above-industry growth and asset quality. “Other factors that contributed to our positive stance on the potential share price performance are historically low foreign shareholding, significantly higher weighting in the FBM KLCI, premium valuation gap that has narrowed and capacity to remain active in capital management in FY2010,” it said. “Coupled with its low-teens FY2010 PER (price-earnings ratio) valuation, we believe there are still value in the stock despite share price has rebounded from its recent low,” it added. RHB Research said that risks faced by the banking group include slower-than-expected loan growth, deterioration in asset quality and changes in market conditions that may adversely affect investment portfolios. Yesterday, Public Bank added 25 sen to close at RM9.95. This article appeared in The Edge Financial Daily, July 16, 2009.
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