MAYBANK (1155) : Malayan Banking Bhd - Looking beyond 2014
Target RM12.50 (Stock Rating: ADD)
At 69% of our full-year forecast and 71% of consensus, Maybank’s 9MFY14 net profit missed expectations due to lower non-interest income and a higher tax rate. As expected, no dividend was declared in the 3Q. We lower our EPS forecasts due to (1) a 3-4% cut in projected FY14-16 non-interest income, and (2) an increase in assumed tax rate from 25% to 26.5% for FY14. This largely offsets the impact of the roll-over of valuation to end-15, leading to an unchanged DDM-based target price (COE of 9.7%; LT growth of 4%). Despite the weak 9M results, Maybank remains an Add and our top pick as we envisage better prospects in 2015 arising from improvements in the operating environment in Indonesia.
Unfavourable operating environment in 9MFY14
Maybank’s 9MFY14 net profit inched down by 0.7%, impacted by (1) the plunge in the earnings of its Indonesian unit, (2) a loss of RM268.6m in its insurance unit, and (3) an 80.9% yoy slump in foreign exchange gains. Moreover, a 24bp yoy drop in net interest margin to 1.87% also limited the growth in net interest income to only 0.8% yoy in 9MFY14. All these offset the 44.5% yoy decline in loan loss provisioning. Fee income still grew but at a weak 2.7% yoy in 9MFY14.
Stronger loan growth
Loan growth picked up from 12.6% yoy in Jun 14 to 13.8% yoy in Sep 14. The improvement came mainly from Malaysia and Indonesia (to 8.4% and 10.7% yoy respectively in Sep 14) following the slowdown in these markets in 2Q14. Although the momentum in Singapore weakened from 21.6% yoy in Jun 14, it remained strong at 19.8% yoy in Sep 14, ahead of the above markets.
Higher, but still healthy, impaired loan ratio
Although the gross impaired loan ratio rose from 1.5% in Jun 14, it was still healthy at 1.65% in Sep 14. Meanwhile, the loan loss coverage fell from 107.7% in Jun 14 to 95.4% in Sep 14.
Vying for a recovery in 2015
The year 2014 has proven to be a tough one for Maybank but we envisage better prospects in 2015, premised on improvements in the operating environment in Indonesia, and the stabilised growth in Malaysia.
Source: CIMB Daybreak - 27 November 2014
Target RM12.50 (Stock Rating: ADD)
At 69% of our full-year forecast and 71% of consensus, Maybank’s 9MFY14 net profit missed expectations due to lower non-interest income and a higher tax rate. As expected, no dividend was declared in the 3Q. We lower our EPS forecasts due to (1) a 3-4% cut in projected FY14-16 non-interest income, and (2) an increase in assumed tax rate from 25% to 26.5% for FY14. This largely offsets the impact of the roll-over of valuation to end-15, leading to an unchanged DDM-based target price (COE of 9.7%; LT growth of 4%). Despite the weak 9M results, Maybank remains an Add and our top pick as we envisage better prospects in 2015 arising from improvements in the operating environment in Indonesia.
Unfavourable operating environment in 9MFY14
Maybank’s 9MFY14 net profit inched down by 0.7%, impacted by (1) the plunge in the earnings of its Indonesian unit, (2) a loss of RM268.6m in its insurance unit, and (3) an 80.9% yoy slump in foreign exchange gains. Moreover, a 24bp yoy drop in net interest margin to 1.87% also limited the growth in net interest income to only 0.8% yoy in 9MFY14. All these offset the 44.5% yoy decline in loan loss provisioning. Fee income still grew but at a weak 2.7% yoy in 9MFY14.
Stronger loan growth
Loan growth picked up from 12.6% yoy in Jun 14 to 13.8% yoy in Sep 14. The improvement came mainly from Malaysia and Indonesia (to 8.4% and 10.7% yoy respectively in Sep 14) following the slowdown in these markets in 2Q14. Although the momentum in Singapore weakened from 21.6% yoy in Jun 14, it remained strong at 19.8% yoy in Sep 14, ahead of the above markets.
Higher, but still healthy, impaired loan ratio
Although the gross impaired loan ratio rose from 1.5% in Jun 14, it was still healthy at 1.65% in Sep 14. Meanwhile, the loan loss coverage fell from 107.7% in Jun 14 to 95.4% in Sep 14.
Vying for a recovery in 2015
The year 2014 has proven to be a tough one for Maybank but we envisage better prospects in 2015, premised on improvements in the operating environment in Indonesia, and the stabilised growth in Malaysia.
Source: CIMB Daybreak - 27 November 2014
