MAYBANK – Fundamental Analysis (17 Mar 2015)

*** I made some data mistakes in the analysis dated 4 Mar 2015. I have made the correction and updated some figures by referring Annual Report 2014. The impact is very slight change to valuation.

MAYBANK Analysis:-

Excel – http://1drv.ms/1GiyDb7

Notes – http://tinyurl.com/kkqt2c9

My View:-

  • Valuation:
    • Absolute EY%:
      • Trailing:
        • FY14 (EPS: 0.742) – Fair value 9.94 (Fair Value Uncertainty: HIGH)
        • R4Q (EPS: 0.742) – Fair value 9.94 (Fair Value Uncertainty: HIGH)
      • Forward:
        • FY15 (EPS: 0.731) – Fair value 9.8 (Fair Value Uncertainty: HIGH)
        • FY16 (EPS: 0.778) – Fair value 10.43 (Fair Value Uncertainty: MEDIUM)
      • EPS applied to reach the current stock price (9.1): 0.679
    • Dividend Discount Model
      • Base Scenario: 8.82 (Fair Value Uncertainty: HIGH)
      • Good Scenario: 9.00 (Fair Value Uncertainty: HIGH)
      • Bad Scenario: 8.65 (Fair Value Uncertainty: HIGH)
      • Ugly Scenario: 8.48 (Fair Value Uncertainty: HIGH)
    • Residual Income Model (This model is very defensive. I consider the derived price as the bare minimum price)
      • Base Scenario: 8.97
      • Good Scenario: 7.28
      • Bad Scenario: 5.74
      • Ugly Scenario: 4.33
  • In my opinion, MAYBANK is currently fully valued. Compare to my previous valuation, the fair values are reduced due to declining of ROE and stagnant dividend payout growth.
  • Despite Net profit is unexpectedly strong (+20.1%qoq; +11.5%yoy), MAYBANK’s ROE declined from 14.2% (FY13) to 12.7% (FY14).
    • Please note that my ROE calculation is slightly different from other analysts, but disregard formula variant, MAYBANK ROE has been declining in these few years.
    • I think this is a common issue in Malaysia banking
    • For latest Banking analysis, please refer: http://tinyurl.com/lv5yp9q
  • For FY15, management has guided an ROE of 13-14%, Group loan growth of 9-10% (Malaysia: 8-9%, Singapore: 8-9% and Indonesia: 13-15%), Group deposit growth of 9-10%, CI ratio of 47-48%, NIM contraction of 8-10bp and credit cost of not more than 0.30%.
  • Due to its strong dividend yield, healthy liquidity and strong capital position, I will continue to hold MAYBANK, and accumulate MAYBANK without increasing my average price too much.
  • I found that institutional shareholders in MAYBANK increased their stakes from 57% (as at 18 Feb) to 69% (as at 17 Mar). This is a huge increment in short period, especially for a bank. EPF and PNB are the main players. To be more precise, ownership of EPF and PNB in MAYBANK do not increase much, so it means other fund managers actively accumulating MAYBANK.

Latest Financial – Annual Report 2014 (13 Mar 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1902609

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

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