Friday April 4, 2008
Public Bank is tops
PETALING JAYA: CIMB Equities Research has chosen Public Bank as its top pick among Malaysian banks, beating all its Malaysian peers on most operating aspects, including returns on equity (ROE), asset quality, loan growth and efficiency.
In a research note issued yesterday, it said Public Bank’s ROE was the highest in the sector and still improving. The bank also had the most compelling dividend yield, double-digit earnings growth, highest loan growth and superior asset quality, it added.
Other factors are the strong deposit franchise, greatest efficiency, new growth avenue in bancassurance, increased overseas contributions, and award-winning ability. The research house has raised financial years 2008 to 2010 net earnings by 1% to 4%, primarily for 26% to 38% cuts in loan loss provisioning.
In its dividend discount model (DDM), it raised the assumed dividend growth rate for the interim phase to 7.2% from 6.7%, resulting in a higher target price of RM14.60 compared with RM13.90 before, which is still pegged to a 10% discount to the DDM valuation.
“We continue to rate Public Bank an ‘outperform’, premised on the re-rating catalysts of continuing ROE improvement to one of the highest in Asia, a jump in FY08 dividend payment, stronger-than-expected contributions from Greater China, lower charge-off rates, and new growth avenue in bancassurance.
“Also, with a dividend yield of more than 9%, Public Bank has the best yield among the Malaysian banks,” it added.
CIMB Research said it considered Public Bank’s end-FY08 price/book value of 3.8 times to be reasonable, given its superior ROE and enticing dividend yield.
“In fact, we view its valuation as undemanding as its FY09 price/earnings of 12.7 times is below its five-year average of 14 times and does not fully reflect the improving ROE, dividend yield and asset quality,” it said.
Public Bank is tops
PETALING JAYA: CIMB Equities Research has chosen Public Bank as its top pick among Malaysian banks, beating all its Malaysian peers on most operating aspects, including returns on equity (ROE), asset quality, loan growth and efficiency.
In a research note issued yesterday, it said Public Bank’s ROE was the highest in the sector and still improving. The bank also had the most compelling dividend yield, double-digit earnings growth, highest loan growth and superior asset quality, it added.
Other factors are the strong deposit franchise, greatest efficiency, new growth avenue in bancassurance, increased overseas contributions, and award-winning ability. The research house has raised financial years 2008 to 2010 net earnings by 1% to 4%, primarily for 26% to 38% cuts in loan loss provisioning.
In its dividend discount model (DDM), it raised the assumed dividend growth rate for the interim phase to 7.2% from 6.7%, resulting in a higher target price of RM14.60 compared with RM13.90 before, which is still pegged to a 10% discount to the DDM valuation.
“We continue to rate Public Bank an ‘outperform’, premised on the re-rating catalysts of continuing ROE improvement to one of the highest in Asia, a jump in FY08 dividend payment, stronger-than-expected contributions from Greater China, lower charge-off rates, and new growth avenue in bancassurance.
“Also, with a dividend yield of more than 9%, Public Bank has the best yield among the Malaysian banks,” it added.
CIMB Research said it considered Public Bank’s end-FY08 price/book value of 3.8 times to be reasonable, given its superior ROE and enticing dividend yield.
“In fact, we view its valuation as undemanding as its FY09 price/earnings of 12.7 times is below its five-year average of 14 times and does not fully reflect the improving ROE, dividend yield and asset quality,” it said.
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