Public Bank at record high
Stock advances to RM14.98 on third quarter results
PETALING JAYA: Shares of Public Bank Bhd have climbed to a record high at RM14.98 with research houses revising their target prices for the stock upwards after the banking group announced its third quarter results.
The counter closed 16 sen higher at RM14.88 with a trade volume of 2.58 million shares.
Research houses CIMB Research and Maybank Investment Bank Research have increased their target prices for the stock from RM15.50 to RM17.30 and from RM16.00 to RM16.70 respectively.
OSK Research added RM1.30 to its fair value from RM14.40 to RM15.70.
Bloomberg data shows that 12 analysts have called it a “buy” while 10 called it a “hold” with a 12month target price of RM15.76.
Analysts were upbeat on the stock due to the company’s strong fundamentals and steady growth.
“Investors should stay invested in Public Bank given its superior fundamentals in the form of the best asset quality and operating efficiency in the sector,” said CIMB Research in a note, adding that the key driver continued to be a drop in the collective assessment ratio.
Maybank Investment Bank Research said its third quarter results ended September 30, 2012 were within expectations at 75% of the brokerage’s and consensus’ fullyear estimates.
The research firm also said its net profit for the first nine months was up 4% year-on-year (y-o-y). If excluding one-off Malaysian Financial Reporting Standard 139 provision write backs in the same period last year, it would be a 10.4% growth y-o-y. The brokerage also said net interest margins (NIMs) of the third largest bank in Malaysia by assets have been stable at 2.5% quarter-on-quarter while its cost efficiencies remain high with a cost/ income ratio of 29.8%.
However, the financial group’s loans to deposit ratio declined marginally to 86.8% end-September from 87.8% end-December last year, the research house noted.
CIMB Research said: “The softening of loan growth from 12% y-o-y in June to 11.6% y-o-y in September was in line with our projected 11% for 2012.
“The slowdown was mainly seen in the working capital loan and residential mortgages segments. Auto loans sustained an 8.7% y-o-y pace in Jun-Sep 12.”
The research firm also said the lender’s overall growth was pulled down by the weaker overseas operations while domestic loan growth remained healthy at an annualised 12.8% in the first nine months against 11.3% for the industry.
As for dividends, OSK Research said an upside surprise was unlikely to materialise in the immediate to medium term. The research unit said the financial group was moderating its dividend payout ratio guidance to 40%-50% versus the original guidance of close to 50% given the need to conserve capital for Basel III.
“Given the limited upside, slowing consumer lending growth as well as NIMs pressure, we are maintaining our ‘neutral’ call on the stock,” it said.