Stock Name: PBBANK
Company Name: PUBLIC BANK BHD
Research House: AMMB
Public Bank Bhd
(Jan 26, RM13.36)
Maintain hold at RM13.34 with fair value RM14.30: We are maintaining our 'hold' call on Public Bank Bhd (PBB) with an unchanged fair value of RM14.30. This is based on our FY11F return on equity estimate of 24.6%, leading to fair price to book value of 3.7 times.
PBB reported a commendable +8.1% quarter-on-quarter and +24.8% year-on-year increase in 4QFY10 net earnings to RM846.2 million. This takes FY10 net earnings to RM3.05 billion, which is 8.1% above our forecast and 3% above consensus earnings. The main surprise for us is in the stronger non-interest income (+5.3% variance), due mainly to the better than expected performance from the unit trust division.
In addition, PBB managed to surprise marginally with a final gross dividend per share (GDPS) of 25 sen and a special tax-exempt dividend of 8 sen, which in total would be above our estimated final GDPS of 30 sen per share.
Taking into account the earlier announced interim GDPS of 25 sen per share, the total GDPS for FY10 would be 58 sen per share, higher than FY09's 55 sen (net DPS FY10: 45.5 sen; FY09: 41.25 sen). This would also be higher than our estimated 55 sen FY10F and consensus' 56 sen per share. Net dividend payout ratio was 52.7% FY10, in line with earlier guidance.
The company says the dividend payout ratio will likely remain within the 52% level seen in 2010, which we think is the lower end of the earlier stated dividend policy range of 50% to 55%. PBB reiterated that assuming a 15% rise in loans growth and dividend payout policy being maintained at 50% to 55%, its core equity ratio will likely be around 7.8% to 7.9% by 2019. This is just marginally above the required 7% level by 2019.
While it does look like PBB's core equity ratio will be above the minimum requirement, this is further dependent on the level of the counter cyclical capital conservation buffer that may be eventually set by local regulators.
While PBB has turned in a good performance, we still believe the stock will likely trade in accordance with its dividend. We think the stock will re-rate only on a significantly stronger than expected dividend. We expect dividends to continue to rise, but by a marginal pace as seen in FY10, as core equity ratios will likely limit the upside to dividends.
We remain neutral on PBB and maintain our 'hold' recommendation with unchanged fair value of RM14.30. ' AmResearch, Jan 26
This article appeared in The Edge Financial Daily, January 27, 2011.
Company Name: PUBLIC BANK BHD
Research House: AMMB
Public Bank Bhd
(Jan 26, RM13.36)
Maintain hold at RM13.34 with fair value RM14.30: We are maintaining our 'hold' call on Public Bank Bhd (PBB) with an unchanged fair value of RM14.30. This is based on our FY11F return on equity estimate of 24.6%, leading to fair price to book value of 3.7 times.
PBB reported a commendable +8.1% quarter-on-quarter and +24.8% year-on-year increase in 4QFY10 net earnings to RM846.2 million. This takes FY10 net earnings to RM3.05 billion, which is 8.1% above our forecast and 3% above consensus earnings. The main surprise for us is in the stronger non-interest income (+5.3% variance), due mainly to the better than expected performance from the unit trust division.
In addition, PBB managed to surprise marginally with a final gross dividend per share (GDPS) of 25 sen and a special tax-exempt dividend of 8 sen, which in total would be above our estimated final GDPS of 30 sen per share.
Taking into account the earlier announced interim GDPS of 25 sen per share, the total GDPS for FY10 would be 58 sen per share, higher than FY09's 55 sen (net DPS FY10: 45.5 sen; FY09: 41.25 sen). This would also be higher than our estimated 55 sen FY10F and consensus' 56 sen per share. Net dividend payout ratio was 52.7% FY10, in line with earlier guidance.
The company says the dividend payout ratio will likely remain within the 52% level seen in 2010, which we think is the lower end of the earlier stated dividend policy range of 50% to 55%. PBB reiterated that assuming a 15% rise in loans growth and dividend payout policy being maintained at 50% to 55%, its core equity ratio will likely be around 7.8% to 7.9% by 2019. This is just marginally above the required 7% level by 2019.
While it does look like PBB's core equity ratio will be above the minimum requirement, this is further dependent on the level of the counter cyclical capital conservation buffer that may be eventually set by local regulators.
While PBB has turned in a good performance, we still believe the stock will likely trade in accordance with its dividend. We think the stock will re-rate only on a significantly stronger than expected dividend. We expect dividends to continue to rise, but by a marginal pace as seen in FY10, as core equity ratios will likely limit the upside to dividends.
We remain neutral on PBB and maintain our 'hold' recommendation with unchanged fair value of RM14.30. ' AmResearch, Jan 26
This article appeared in The Edge Financial Daily, January 27, 2011.
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