AmInvest Research retains Buy on Maybank, FV RM9.50

KUALA LUMPUR: AmInvestment Bank Research maintained its Buy call on Malayan Banking (Maybank) with a lower fair value of RM9.50 a share.

In its research note issued on Friday, it said the lower fair value was after it pegged the stock to a lower return on equity (ROE) of 10.0%, leading to a FY20 price-to-book value (P/BV) of 1.3 times.

AmInvest Research finetuned its FY20/21 earnings by 0.6%/-5.5% as it factored in another potential interest rate cut of 25bps in 1H 2020 and tweaked its NOII projection.

“Our earnings estimates have now taken into account a total OPR reduction of 50bps for FY20 which includes the OPR cut of 25bps on Jan 22,2020, ” it said.

Maybank group reported an improved net profit of RM2.5bil (+22.5% QoQ) in 4Q19 on the back of lower provisions.

The 12M19 earnings of RM8.2bil grew modestly by 1.0% YoY with a higher total income offset by rise in opex and provisions.

“Cumulative earnings were within expectations, making up 103.7% of our and 103.8% of consensus estimates respectively, ” AmInvest Research said.

Loan growth was tepid at 1.2%YoY as the expansion of Malaysia loans was offset by contractions of loans in Singapore and Indonesia.

“The group is cautious on corporate loans in Singapore and Indonesia due to the weaker asset quality in these international markets.

“Net interest margin (NIM) slipped 3bps QoQ to 2.29% due to lower asset yields. The group has continued to trim its excess liquidity in Indonesia with a contraction in FDs owing to the slowdown of loan growth in the country.

“Group GIL ratio improved slightly to 2.65% from 2.67% in the preceding quarter supported by reclassification of R&R loans to performing. FY19 credit cost rose of 0.44% was within our expectation and management guidance, ” it said.

AmInvest Research said the group’s capital ratios remained healthy with a CET1 ratio of 14.6%. • The group has proposed a final dividend of 39 sen share bringing total dividends to 64 sen/share (all cash dividends with no DRP option).

This translated to a highest dividend payout of 88.0% beating the research house’s expectation of a payment of 55 sen for FY19.