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PETALING JAYA: CIMB Research has downgraded Malayan Banking Bhd
(Maybank) to a Hold from an Add previously due to its unattractive valuation.
The research house in a note said the bank’s share price has surged by 15.2% in the past two months to hit the target price of RM10.00 on August 29.
Currently, its valuation is not attractive as its FY19 price-to-earnings (P/E) of 12.9 times is more than one standard deviation above its 5-year average of 11.3 times.
“For this reason, we downgrade our rating for Maybank from Add to Hold. We had previously upgraded the stock to Add on June 27 when it was trading at RM8.68. We prefer RHB Bank for exposure to Malaysian banks,” it added.
Despite the provisioning for Hyflux exposures, Maybank’s Q2 18 loan loss provisioning (LLP) declined by 29.9% y-o-y, partly due to the higher base a year ago.
The LLP was also brought down by a RM146.9mil write-back in the stage 1 loan, which the research house think was due to over-provisioning previously.
The lower LLP in Q2 18 helped the bank to record a strong net profit growth of 18.1% y-o-y in Q2 18, it noted.
During the conference call, the brokerage said Maybank unveiled that its exposure to Hyflux stood at S$658.6mil (RM1.95bil) as at end-Jun 18, which was classified as impaired.
With this, it booked a loan loss provisioning of S$106.3mil (RM315.1mil) in Q1 18 for this impaired loan. Despite this chunky provisioning, the bank is confident that it can still achieve its targeted credit charge-off rate of 40-45 basis points.
“At 49% of our full-year forecast and 48% of Bloomberg consensus estimates, Maybank’s first half FY18 net profit was within our and market expectations. The interim dividend per share (DPS) of 25 sen is also largely in line with our expectations.
“We retain our FY18-20F EPS forecasts and dividend discount model (DDM) based target price of RM10.00,’’ it added.
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