MAYBANK (FV RM10.15 – BUY) Stock Pick: Robust Growth

Maybank has been delivering asset and earnings growth that has beaten its peers for several quarters. Although the recent private placement may give rise to a capital overhang, this would be temporary as the group is effectively channelling the excess in the form of above-industry asset growth while maintaining its relatively high dividend payout. We are maintaining our BUY call and FV of RM10.15 (2.14x FY12 PBV, 14.0% ROE, 9.5% COE and 4% growth rates) given Maybank’s inexpensive 1.8x FY12PBV valuation, the cheapest among the top three banks.

Vital in sustaining sizzling organic growth. Maybank’s recent capital raising exercise places the group ahead of the curve in complying with the stringent capital requirements of Basel 3 while sustaining above-industry growth. This reinforces our positive stance on the exercise since: i) the quantum is relatively manageable and would only marginally impact EPS dilution, ii) it gives the group a headstart in achieving strong capital buffers before Bank Negara’s counter-cyclical buffers come into force from 2014 onwards, and iii) it will allow the group to sustain growth rates above its peers’, which will in turn consistently drive its earnings upside surprises and ROE re-ratings.

Maintaining high dividend payouts. We estimate that the completion of the RM3.6bn share private placement will provide the group with the scope to maintain both its relatively high dividend payout ratio of 60% to 75%, while sustaining its Risk Weighted Asset growth rates at above 12% and Core Tier-1 Equity (CT1E) above the 9% threshold. Given the need to potentially scale up its capital base further, the group intends to maintain its existing dividend reinvestment plan, which will consequently ensure that dividend payouts remain significantly above those of its peers.

Maintain BUY. We are maintaining our BUY recommendation and RM10.15 FV (2.14x FY12 PBV, 14.0% ROE, 9.5% COE and 4% growth rates) on Maybank given the stock’s inexpensive valuation of 1.8x FY12 PBV, which is the cheapest among Malaysia’s top three banks. Its relatively superior capital base places the group in a strong position to consistently deliver earnings growth and generous dividend payouts ahead of its peers in the near- to mid-term.

Source: OSK