The 2011 Budget,

which will be tabled on Oct 15, will set the pace to

transform Malaysia into a developed and high-income economy

 

Regards

 

Rohizal Moktar

 

RHBuBank SHARE TRADING

 

TAMAN SENTOSA

 

T-07-3344760

 

F-07-3344854

 

M-012-7701202

 

http://twitter.com/rhbinvest

 

http://www.rhbinvest.com

 

Malaysian  Sector  Call

Malaysian  Banks:

¨       Aug ‘10 system data – Monthly applications at another high and broad-base.

¨       No change to our Overweight rating on the sector.

Assuming the entire electable portion of the dividend is converted into shares, we estimate this could enlarge Maybank’s share capital base by 4%.DRP.

♦ 4QFY06/10 results within expectations ... Maybank’s 4Q results were within our (upper-end) and consensus estimates with FY10 net profit of RM3.8bn (+75% yoy, core basis) accounting for 105% of our and 102.5% of consensus full-year forecasts. Note that Maybank made some preemptive provisioning in the tune of RM334m during the quarter, excluding which, the results would have been even stronger.

♦ … with net profit down 11% qoq but up 49% yoy (core basis).

QoQ, net profit fell 11% due to lower non-interest income (-9.6% qoq due to lumpy items recognised in 3Q10) and higher LLP (+44.4% qoq due to pre-emptive provisioning), cushioned by stronger net interest income (+7% qoq). YoY, net profit surged 49% (based on core profits) thanks mainly to lower LLP (-60.2% yoy). This was despite the pre-emptive provisioning, which was offset by higher recoveries and lower provision for other debts.

♦

Loan growth picked up momentum with qoq and yoy growth of 4.4% and 10.3% respectively (3Q10: 0.7% qoq; 5.9% yoy).

♦

Gross and net NPL as well as LLC ratios improved (see Table 4).

♦

Maybank declared a higher-than-expected final gross DPS of 44 sen (4QFY09: 8 sen gross), as compared to our expected gross DPS of 18 sen. This comprises an electable portion of 40 sen (gross), which can be elected to be reinvested in new Maybank shares. For the full-year, total gross DPS was 55 sen (FY09: 8 sen), which translates to a net payout ratio of 76.5%.

♦

We have fine-tuned and updated our FY11-12 earnings forecasts post the full-year results. We introduce our FY13 numbers.

♦

Our fair value has been raised by 2% to RM9.86 based on unchanged 15x (benchmark) CY11 EPS. In our view, valuations remain decent with strong organic growth expected from the domestic operations as well as BII. Hence, the negative impact from the expensive acquisitions (of BII and MCB) would be more than nullified with FY11 EPS expected to exceed pre-acquisition levels. Maintain Outperform.Investment case. Forecasts. Dividend. Asset quality improved.

Domestically, gross loans expanded by 4.2% qoq (+11% yoy) mainly due to an expansion in corporate loans while overseas loans grew by 4.8% qoq (+8.8% yoy), largely driven by strong growth over at BII (+16.5% qoq; +37.7% yoy). Unadjusted NIM expanded by 16bps qoq (+14bps yoy) while credit cost was roughly stable qoq at 11bps (3Q10: 10bps; 4Q09: 22bps). CIR was also broadly stable qoq at 49.7% (3Q10: 49.1%) but higher as compared to 47.8% in 4Q09.Results highlights.

Dividend History