PBBANK – Fundamental Analysis (3 Nov 2014)

PBBANK Analysis:-

Excel – http://1drv.ms/1wX4cQ3

My View:-

– Fair values:
  – Absolute EY%:
    – Trailing:
      – FY13 (EPS: 1.161) – Fair value 18.56 (Fair Value Uncertainty: HIGH)
      – R4Q (EPS: 1.196) – Fair value 19.12 (Fair Value Uncertainty: HIGH)
    – Forward:
      – FY14 (EPS: 1.161) – Fair value 18.56 (Fair Value Uncertainty: HIGH)
      – FY15 (EPS: 1.245) – Fair value 19.9 (Fair Value Uncertainty: HIGH)
    – EPS applied to reach the current stock price (18.54): 1.16
  – Dividend Discount Model
    – Base Scenario: 20.15 (Fair Value Uncertainty: HIGH)
    – Good Scenario: 21.44 (Fair Value Uncertainty: MEDIUM)
    – Bad Scenario: 18.95 (Fair Value Uncertainty: HIGH)
    – Ugly Scenario: 17.84 (Fair Value Uncertainty: HIGH)
  – Residual Income Model (This model is very defensive and sensitive to ROE. I consider the derived price as the bare minimum price)
    – Base Scenario: 12.22
    – Good Scenario: 18.04
    – Bad Scenario: 8.73
    – Ugly Scenario: 7.36
– In FY14-FY15, intense competition amongst financial institutions for market share as well as the need for higher capital conservation due to the requirements of Basel III capital framework, will continue to put pressure on pricing of products and return on equity. PBBANK growth will be slowing down, and this is proven from the declining ROE in the past 5 years.
  – Besides, growth in the profit from its retail operations has been subdued at 0.03% due to pressures on margin while its hire purchase segment’s profit for 1HFY14 declined 8.2%yoy to higher impairment allowance and NIM compression.
– Growth in retail operations’ profit was modest at 5.0%yoy while that of hire purchase segment declined by 9.6%yoy for 9MFY14. Moving forward, COF pressures are unlikely to abate. This is due to the tight liquidity of the domestic banking sector leading to strong competition for deposits which will consequently raise COFs. Also, loan growth for the Group’s retail operations, HP and SME loans have moderated.
– With no near term catalyst,I will continue to hold and monitor PBBANK, but will not accumulate PBBANK at this moment. After holding PBBANK for almost 15 years, the dividend gains covered almost 95% of my cost. I will just let it float with so called "cost free".
– For latest Banking sector analysis, please visit http://www.midf.com.my/images/pdf/research-Report/Equity-Beat/2014/Banking-Loans%20growth%20momentum%20remains%20slow-MIDF-011014.pdf

Latest Financial – Q3 2014 Financial Report (23 Oct 2014) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1773293

At the time of writing, I owned shares of PBBANK.


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