MAYBANK – Fundamental Analysis (1 Dec 2015)

Fundamental Analysis as of FY14 – http://www.slideshare.net/lcchong76/maybank-fundamental-analysis-fy14

Excel – http://1drv.ms/1LLkMHT

Latest Financial – Q3 2015 Financial Report (26 Nov 2015) http://www.bursamalaysia.com/market/listed-companies/company-announcements/4931865

Peer Comparison – http://www.slideshare.net/lcchong76/bank-industry-klse-peer-comparison

FY15 Q3 Results Highlight:

  • The Group reported a stronger net profit of RM1.89b (+19.8%qoq; +18.1%yoy) in 3QFY15 leading to cumulative earnings of RM5.19b (+8.3%yoy) for 9MFY15,  excluding a one-off gain from the sale of Papua New Guinea (PNG) branch of RM197m in 3QFY15.
  • Group is on track to meet its ROE, loan and deposit growth targets for FY15. Nevertheless, its credit charge-off of 0.40% (annualised) for 9MFY15 has exceeded management’s guidance of 0.30% to 0.33% for FY15. Management has not given a revised guidance on credit charge-off. Otherwise, the Group is on track to achieve its overall loan growth target thanks to the pick-up of loans in Malaysia and Singapore compared to the preceding quarter.
  • Reported loans growth of 17.8% and deposit growth of 12.6% beat management guidance of 8-9% and 10-11% respectively.
  • In Indonesia, its YTD loan growth with an annualised rate of 5.9% for 9MFY15 was behind the Group’s target of 10-13% for FY15.
  • For 3Q15, net interest income grew by 9.2% qoq (+20.3% yoy) to RM3.98bn, thanks to loans growth of 7.4% qoq (and+ 20.1% yoy), higher Islamic income but party offset by lower NIM. However, the higher net interest income and NOII (which was in turn boosted mainly by higher fee income, dividend income and forex gain) were dragged partly by higher overhead expenses and provisions (mainly due to asset quality deterioration in Indonesia and Singapore). This was partially offset by higher provisions for loan impairment (+179.7%yoy) mainly due to a rise in IA and lower recoveries and higher allowance for impairment on financial investments (+427.5%yoy) contributed by impairment in the equity portfolio book of Etiqa Insurance.
  • Asset quality (AQ) deteriorated, with IL rising by 5.9% qoq (and 12.5% yoy) to RM7.2bn, mainly in Singapore and Indonesia, and this has resulted in credit charge rising to alltime- high of 14.9bps (from 7.1bps in 2Q15 and 1.9bps in 3Q14). Management is not overly concerned with the deteriorated AQ, as it expect both Malaysian and Indonesian markets to remain fairly stable, while the recent spike in NPL in Singapore was case specific, of which the exposure is mostly collateralized.

Valuation:

  • Absolute P/B:
    • Historical
      • Trailing:
        • FY14 (BPS: 5.849) – 9.42 (Uncertainty Risk: HIGH)
        • Current (BPS: 6.248) – 10.06 (Uncertainty Risk: MEDIUM)
      • Forward:
        • FY15 (BPS: 5.963 ± 5%) – From 9.12 to 10.08 (Uncertainty Risk: MEDIUM to HIGH)
        • FY16 (BPS: 6.25 ± 5%) – From 9.56 to 10.57 (Uncertainty Risk: MEDIUM)
      • BPS applied to reach the current stock price (8.44): 5.242
    • Industry
      • Trailing:
        • FY14 (BPS: 5.849) – 8.76 (Uncertainty Risk: HIGH)
        • Current (BPS: 6.248) – 9.36 (Uncertainty Risk: HIGH)
      • Forward:
        • FY15 (BPS: 5.963 ± 5%) – From 8.49 to 9.38 (Uncertainty Risk: HIGH)
        • FY16 (BPS: 6.25 ± 5%) – From 8.90 to 9.83 (Uncertainty Risk: MEDIUM to HIGH)
  • In my opinion, fair value of MAYBANK range from 9.3 to 9.8. Uncertainty risk of fair value is MEDIUM.

MAYBANK-FY15-Q3-Football

Going Forward:

  • MAYBANK forecasted that Malaysian loan growth of 6% to 7% in 2015.
  • 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.

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

2 thoughts on “MAYBANK – Fundamental Analysis (1 Dec 2015)

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