Stock Name: MAYBANK
Company Name: MALAYAN BANKING BHD
Research House: AMMB
Malayan Banking Bhd (Maybank)
(May 14, RM7.72)
Maintain hold at RM7.72 with fair value upgraded to RM7.20: We maintain our hold rating on Maybank with an upgraded fair value of RM7.20 or fair P/BV (price/book value) of 1.8 times. This is based on a return on equity (ROE) of 14.8% on a calendarised basis for 2010.
Maybank reported net earnings of RM1.03 billion (+3.7% quarter-on-quarter, +104.7% year-on-year), for 3QFY10, taking full 9MFY10 net earnings to RM2.91 billion. Its 3QFY10's net earnings, if annualised, would be 13.7% above our full-year forecasts and 16.8% above consensus estimates.
However, net earnings were boosted by a RM305.3 million unrealised gain on its securities held-for-trading and derivatives position (relating mostly to is cross currency swap transaction, which had benefited from a strengthening of the ringgit) in 9MFY10. We estimate about two-thirds of this gain were included in 3QFY10 (the balance in 2QFY10). Aside from this, we estimate there was also a more than a RM50 million gain related to unrealised foreign exchange gain from its RM519 million debt raised as part of its working capital to fund Bank Internasional Indonesia (BII).
In short, if one were to exclude these one-off items, 9MFY10's net earnings if annualised would be estimated to be -2.2% below our forecasts, and +0.5% above consensus' RM3.37 billion net earnings estimate for FY10F. We would therefore consider its 3QFY10 to be in line with our estimates.
Maybank set a confident tone overall during its briefing for analysts. It does not expect its net credit charge-off to be higher than 56 basis points (bps), which is better than its earlier guidance of 60-70bps for FY10F. With the inclusion of unrealised one-off gains, the company is likely to exceed its ROE target of 13% for FY10F. Foreign shareholding has edged up to 12.6% currently from 10.9% end 2009.
We revisited our forecast assumptions, namely loan growth and credit costs. We revise upwards our overall loan growth assumption to 9% y-o-y for FY10F, from 4% previously in view of Maybank's annualised loan growth of 7.6% for 9MFY10. We have also adjusted our net credit charge-off rate to 56bps FY10F, from 60bps previously.
Our net earnings have been upgraded by 6.7% FY10F, 5.1% FY11F and 4.9% FY12F. As such, our ROE is now lifted to 14.2% FY10F, 15.4% FY11F and 15.5% FY12F (from 13.4%, 14.8% and 15% respectively). Based on our upgrades, we derive a new fair P/BV of 1.8 times, based on calendarised ROE of 14.7% 2010.
This leads to new fair P/BV of RM7.20/share. We believe a better ROE performance is priced in. For a substantial rerating of the stock to say RM9, we estimate ROE will need to be uplifted to at least 17%. ' AmResearch, May 14
This article appeared in The Edge Financial Daily, May 17, 2010.
Company Name: MALAYAN BANKING BHD
Research House: AMMB
Malayan Banking Bhd (Maybank)
(May 14, RM7.72)
Maintain hold at RM7.72 with fair value upgraded to RM7.20: We maintain our hold rating on Maybank with an upgraded fair value of RM7.20 or fair P/BV (price/book value) of 1.8 times. This is based on a return on equity (ROE) of 14.8% on a calendarised basis for 2010.
Maybank reported net earnings of RM1.03 billion (+3.7% quarter-on-quarter, +104.7% year-on-year), for 3QFY10, taking full 9MFY10 net earnings to RM2.91 billion. Its 3QFY10's net earnings, if annualised, would be 13.7% above our full-year forecasts and 16.8% above consensus estimates.
However, net earnings were boosted by a RM305.3 million unrealised gain on its securities held-for-trading and derivatives position (relating mostly to is cross currency swap transaction, which had benefited from a strengthening of the ringgit) in 9MFY10. We estimate about two-thirds of this gain were included in 3QFY10 (the balance in 2QFY10). Aside from this, we estimate there was also a more than a RM50 million gain related to unrealised foreign exchange gain from its RM519 million debt raised as part of its working capital to fund Bank Internasional Indonesia (BII).
In short, if one were to exclude these one-off items, 9MFY10's net earnings if annualised would be estimated to be -2.2% below our forecasts, and +0.5% above consensus' RM3.37 billion net earnings estimate for FY10F. We would therefore consider its 3QFY10 to be in line with our estimates.
Maybank set a confident tone overall during its briefing for analysts. It does not expect its net credit charge-off to be higher than 56 basis points (bps), which is better than its earlier guidance of 60-70bps for FY10F. With the inclusion of unrealised one-off gains, the company is likely to exceed its ROE target of 13% for FY10F. Foreign shareholding has edged up to 12.6% currently from 10.9% end 2009.
We revisited our forecast assumptions, namely loan growth and credit costs. We revise upwards our overall loan growth assumption to 9% y-o-y for FY10F, from 4% previously in view of Maybank's annualised loan growth of 7.6% for 9MFY10. We have also adjusted our net credit charge-off rate to 56bps FY10F, from 60bps previously.
Our net earnings have been upgraded by 6.7% FY10F, 5.1% FY11F and 4.9% FY12F. As such, our ROE is now lifted to 14.2% FY10F, 15.4% FY11F and 15.5% FY12F (from 13.4%, 14.8% and 15% respectively). Based on our upgrades, we derive a new fair P/BV of 1.8 times, based on calendarised ROE of 14.7% 2010.
This leads to new fair P/BV of RM7.20/share. We believe a better ROE performance is priced in. For a substantial rerating of the stock to say RM9, we estimate ROE will need to be uplifted to at least 17%. ' AmResearch, May 14
This article appeared in The Edge Financial Daily, May 17, 2010.
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