CIMB Research keeps Outperform call on Public Bank

Written by Joseph Chin
Friday, 16 October 2009 09:54

KUALA LUMPUR: CIMB Equities Research reaffirmed its Outperform recommendation on Public Bank following its superior 3Q09 performance with double-digit loan growth, benign non-performing loans (NPL) ratio and returns on equity (ROE) of 25.7%.

"It remains our pick of the big-cap Malaysian banks. Potential share price triggers include ROEs of 28%-29% for FY10-11; iincreased contributions from Greater China, and new growth avenue in bancassurance," it said.

CIMB said on Friday, Oct 16 another plus factor was Public Bank was the bank's dividend yield of 9%-10%, the highest in the sector.

On Thursday, Public Bank posted net profit of RM639.04 million compared with the RM616.34 million a year ago. Revenue was RM2.438 billion, a slight decline from the RM2.79 billion a year ago. Earnings per share were 18.52 sen compared with 18.37 sen.

For the nine-months ended Sept 30, 2009, net profit declined to RM1.839 billion compared with RM1.927 billion. Revenue slipped to RM7.22 billion from RM7.94 billion.

"Public Bank's nine-months net profit slipped 4.6% to RM1.84 billion, which is within expectations, being 72% of our full-year forecast and 76% of consensus. As expected, the bank did not declare a dividend for the quarter, keeping the YTD dividend per share at 30 sen.

"We are tweaking our FY09-11 earnings up by 0.2-0.6% while retaining our target price of RM15.00 as we continue to apply a 10% premium over our DDM value (unchanged cost of equity of 14.3% and interim dividend growth rate of 11.4%). The stock remains an Outperform," it said.