Be cautious into 3Q. 1Q09 results of the six banking stocks we cover
were generally in line, with combined net profit down 2.1% QoQ and
13.1% YoY. However, the weak 1Q09 GDP suggests growing stress in
system loans over the coming months. We remain cautious on banks’
profits, especially from 3Q09. Underweight the sector.
1Q down a sharp 13.1% YoY. Other than AMMB’s positive surprise,
results were generally in-line. The combined net profit of our banking
universe was flattish QoQ but fell a sharp 13.1% YoY on lower treasury
and FX income and higher loan loss provisions. Net interest income
expanded, but the weak equity market continued to affect brokerage
income, which contracted for the 5th to 6th consecutive quarter.
Some signs of stress. Domestic loans continued growing at most
banks. QoQ loan growth at the major banks (Maybank, CIMB Bank and
Public Bank) outpaced system growth. Some loan segments, however,
have begun showing stress. Domestic NPL saw upticks in the
consumer (mortgage, autos) and working capital segments. Net NPL
ratios continued to trend down due to the expanded loans base.
Earnings to contract. There were no major revisions in our individual
earnings forecasts except for AMMB (FY09: +16%, FY10: +7%). Our
combined net profit forecast was upgraded by a marginal 0.1% for 2009
and 0.7% for 2010. We expect sector earnings to contract 9.9% in
2009, before recovering to 6.8% growth in 2010 (previously -10.1%,
+6.1% respectively). This excludes further impairment in the value of
long-term investments, merger costs and other one-offs.
Asset quality concerns. 1Q09 GDP (-6.2% YoY, -7.7% QoQ) should
be the weakest, suggesting that the worst may be over. However, we
expect economic recovery to be slow, with real GDP to return to the
3Q08 high only in 4Q10. There is a 3-6 month interval from GDP trough
to NPL peak. Hence, banks are set to report weaker profits on rising
NPLs and higher credit charges from 3Q09.
Mainly Sells. Against regional peers, the larger Malaysian banks are
pricey. The current liquidity driven market has pushed valuations up but
prospects for a strong economic recovery stay hazy. Sell into strength.
BANKING Mar 09 Statistics Some ResilienceBoyboy cute
Positive signs. Loan disbursements, repayments, applications and
approvals rebounded with strong double-digit MoM growth, flattish-tolow-
teens YoY growth, and in absolute term, were back to pre-Aug/Sep
’08 levels. Absolute NPLs continued to inch lower, mainly from the
working capital segment. Nonetheless, it is early to tell whether these
are sustainable as global fundamentals remain weak.
Strong loan disbursements and repayments. Banking loans (net of
repayments) grew to RM733.9m in Mar ’09 (+0.6% MoM, +10.9% YoY)
on expansion in both household (+0.4% MoM, +8.8% YoY) and
business loans (+0.9% MoM, +9.5% YoY). The pace of disbursements
and repayments was strong (disbursements: +27.4% MoM, +9% YoY;
repayments: +15.7% MoM, +4.8% YoY), mainly for working capital.
YTD loans growth was +1% (household: +1.5%, business: +0.5%).
Forward indicators bounced MoM but still flattish YoY. Loan
applications and approvals also rebounded strongly: +24.3% MoM and
+35.3% MoM respectively. On a YoY comparison, loan applications
were up 4.7%, driven by household loan applications (+21.5%), mainly
for home purchases, which off-set lower applications from businesses
(-11%). Overall loan approvals were rather flattish YoY, with approvals
up for household loans (+12.6%) but down for business loans (-13%).
Absolute NPLs contracted further. Absolute gross NPLs continued
to inch lower, at a slightly higher pace of -3.7% MoM to RM33.6b (Feb
‘09: -0.04% MoM). On a 3-month comparison (see table in page 4),
the lower NPLs came mainly from the working capital segment,
reflecting perhaps resilient business strength. Meanwhile, net NPL ratio
was little changed at 2.24% (Feb ‘09: 2.23%).
Remain Underweight. YTD loans growth, if sustained, should lead to
the upper end of our 2-3% loans growth forecast for 2009. Our other
assumption is for absolute NPLs to expand by 50% YoY by end-2009,
leading to a projected 10% decline in combined net profit for 2009.
While loans quality was resilient in Mar ’09, we remain concerned over
rising NPLs – our analysis shows a 3-6 months interval from GDP
trough to NPL peak. The other main risk is a protracted economic
slowdown leading to rising unemployment and asset deflation.
Weakness ahead. Loan disbursements, applications and approvals
slowed in Apr, reflecting cautious sentiment. Loans growth was just
1.4% YTD, and 4.2% annualised. There was a slight uptick in absolute
NPLs, implying stress in some loans segments. The poor 1Q09 GDP
numbers suggest growing stress in system loans over the next few
months. We remain cautious on banks’ profits, especially from 3Q09.
1.4% YTD loans growth. Banking loans (net of repayments) grew to
RM736.5m in Apr ’09 (+0.4% MoM, +10.6% YoY) on expansion in both
household (+0.7% MoM, +8.5% YoY) and business loans (-0.03%
MoM, +9.2% YoY). Disbursements slowed (-6.6% MoM, -6.4% YoY)
but repayments were relatively stable (+1.3% MoM, -2.8% YoY). YTD
loans growth was +1.4% (4M2008: +3.4%), driven by household loans
(+2.2%) while business loans’ growth was anemic (+0.4%).
Forward indicators contracting. Loan applications and approvals fell
YoY: -5.4% and -18.2%. The business segment saw loan applications
and approvals down 24.2% and 35%, while the household segment
continued to see growing appetite in loan applications but flattish loan
approvals. On a MoM comparison, both indicators also showed
contraction. Loan applications fell 1.4% while approvals slipped 0.8%.
Absolute NPLs inched up. Absolute NPLs ticked-up by 0.34% MoM to
RM33.7b (Mar ‘09: -3.7% MoM). However, Apr ‘09’s absolute NPLs
were still lower than a year ago, by 14.7%. We suspect the rising NPLs
came from the business segment, especially exporters. The net NPL
ratio was unchanged at 2.24% due to the expanded loans base. Loan
loss coverage (LLC) remained adequate at 88.5% (Mar ’09: 88.3%).
Stay Underweight. The combined 1Q09 net profit of the six banking
stocks we cover was down 2.1% QoQ, and a sharper 13.1% YoY, on
lower treasury and FX income and higher loan loss provisions. We
expect sector earnings to contract 10% YoY in 2009 and reiterate our
concerns on asset and loan quality as the economy contracts over the
next two quarters. Our analysis shows a 3-6 months interval from GDP
trough to NPL peak. Banks are set to report weaker profits.
Competition in financial sector to intensify gradually. Following the
liberalization of equity ownership requirements in 27 non-financial
services areas last week, the Government announced liberalization
measures for the financial sector yesterday. The ‘gradualist’ approach
does not come as a surprise, as we enter the final phase of the
Financial Sector Master Plan which has laid out a road map for greater
foreign participation by 2010.
Up to seven more foreign owned commercial/Islamic banks. The
liberalization measures encompass three areas, namely:
up to seven new licenses for foreign commercial and Islamic banks
– four in 2009 and three in 2011, which may be 100% foreign
owned, and two more takaful operators;
increase in foreign equity limits in domestic insurance/takaful,
investment banks and Islamic banks to 70% (from 49% previously);
greater operational flexibility for locally-incorporated foreign
commercial banks, mainly in branch openings.
Existing domestic commercial banks’ foreign ownership limit of 30% is
unchanged. Details of the measures are summarized in page 2.
Generally, in line with the “managed” approach in the past, as
opposed to the “Big-Bang” approach. This fits in with the national
development agenda of enhancing contribution of the services sector
as a source of growth, employment, investment and trade, as well as
laying the foundations for the domestic financial services sector to take
advantage of the eventual recovery in the global economy and
investment flows.
Gives local banks “some time” before the “crunch” in 2011. On the
outset, the moves imply increased competition for the domestic
commercial banks. But this will not come immediately as the two new
commercial banking licenses in 2009 to foreign players are for
"specialized expertise", relating to “industry-specific financing” like for
shipping, technology, infrastructure and agro-based. Also, greater
operational flexibility for foreign commercial banks for micro-financing
should not have an immediate material impact on the domestic banks.
In essence, the domestic commercial banks have a 1½ year time frame
to raise their competitiveness and efficiency before the opening of the
banking sector to three world-class commercial banks in 2011.
The liberalisation measures are LT positive in raising Malaysia’s
competitiveness in the financial services sector. We however,
maintain Underweight on the Banking sector. The immediate issues
are on asset quality, as the global and domestic economy head for a
slowdown. We stay concerned over rising NPLs and equity cash calls
to boost core capital (although not needed for now). The main risk is a
more severe and protracted economic downturn, with spikes in
unemployment (3.7% @ end-2008), and asset deflation.
BRSA Consolidated Earnings Presentation, December 31, 2011Garanti Bank
Garanti Bank announced its consolidated financial statements dated December 31st, 2011. In 2011, the Bank reached consolidated total assets of TL 163.5 billion and consolidated net profit of TL 3 billion 346 million. Garanti Bank delivered an ROAE (Return on Average Equity) of 19.5% and ROAA (Return on Average Assets) of 2.2%.
BRSA Bank-Only Earnings Presentation, December 31, 2011 Garanti Bank
Garanti Bank announced its unconsolidated financial statements dated December 31st, 2011. In 2011, the Bank reached total assets of TL 146.6 billion and net profit of TL 3 billion 70 million. Garanti Bank delivered an ROAE (Return on Average Equity) of 18.2% and ROAA (Return on Average Assets) of 2.2%.
BANKING Mar 09 Statistics Some ResilienceBoyboy cute
Positive signs. Loan disbursements, repayments, applications and
approvals rebounded with strong double-digit MoM growth, flattish-tolow-
teens YoY growth, and in absolute term, were back to pre-Aug/Sep
’08 levels. Absolute NPLs continued to inch lower, mainly from the
working capital segment. Nonetheless, it is early to tell whether these
are sustainable as global fundamentals remain weak.
Strong loan disbursements and repayments. Banking loans (net of
repayments) grew to RM733.9m in Mar ’09 (+0.6% MoM, +10.9% YoY)
on expansion in both household (+0.4% MoM, +8.8% YoY) and
business loans (+0.9% MoM, +9.5% YoY). The pace of disbursements
and repayments was strong (disbursements: +27.4% MoM, +9% YoY;
repayments: +15.7% MoM, +4.8% YoY), mainly for working capital.
YTD loans growth was +1% (household: +1.5%, business: +0.5%).
Forward indicators bounced MoM but still flattish YoY. Loan
applications and approvals also rebounded strongly: +24.3% MoM and
+35.3% MoM respectively. On a YoY comparison, loan applications
were up 4.7%, driven by household loan applications (+21.5%), mainly
for home purchases, which off-set lower applications from businesses
(-11%). Overall loan approvals were rather flattish YoY, with approvals
up for household loans (+12.6%) but down for business loans (-13%).
Absolute NPLs contracted further. Absolute gross NPLs continued
to inch lower, at a slightly higher pace of -3.7% MoM to RM33.6b (Feb
‘09: -0.04% MoM). On a 3-month comparison (see table in page 4),
the lower NPLs came mainly from the working capital segment,
reflecting perhaps resilient business strength. Meanwhile, net NPL ratio
was little changed at 2.24% (Feb ‘09: 2.23%).
Remain Underweight. YTD loans growth, if sustained, should lead to
the upper end of our 2-3% loans growth forecast for 2009. Our other
assumption is for absolute NPLs to expand by 50% YoY by end-2009,
leading to a projected 10% decline in combined net profit for 2009.
While loans quality was resilient in Mar ’09, we remain concerned over
rising NPLs – our analysis shows a 3-6 months interval from GDP
trough to NPL peak. The other main risk is a protracted economic
slowdown leading to rising unemployment and asset deflation.
Weakness ahead. Loan disbursements, applications and approvals
slowed in Apr, reflecting cautious sentiment. Loans growth was just
1.4% YTD, and 4.2% annualised. There was a slight uptick in absolute
NPLs, implying stress in some loans segments. The poor 1Q09 GDP
numbers suggest growing stress in system loans over the next few
months. We remain cautious on banks’ profits, especially from 3Q09.
1.4% YTD loans growth. Banking loans (net of repayments) grew to
RM736.5m in Apr ’09 (+0.4% MoM, +10.6% YoY) on expansion in both
household (+0.7% MoM, +8.5% YoY) and business loans (-0.03%
MoM, +9.2% YoY). Disbursements slowed (-6.6% MoM, -6.4% YoY)
but repayments were relatively stable (+1.3% MoM, -2.8% YoY). YTD
loans growth was +1.4% (4M2008: +3.4%), driven by household loans
(+2.2%) while business loans’ growth was anemic (+0.4%).
Forward indicators contracting. Loan applications and approvals fell
YoY: -5.4% and -18.2%. The business segment saw loan applications
and approvals down 24.2% and 35%, while the household segment
continued to see growing appetite in loan applications but flattish loan
approvals. On a MoM comparison, both indicators also showed
contraction. Loan applications fell 1.4% while approvals slipped 0.8%.
Absolute NPLs inched up. Absolute NPLs ticked-up by 0.34% MoM to
RM33.7b (Mar ‘09: -3.7% MoM). However, Apr ‘09’s absolute NPLs
were still lower than a year ago, by 14.7%. We suspect the rising NPLs
came from the business segment, especially exporters. The net NPL
ratio was unchanged at 2.24% due to the expanded loans base. Loan
loss coverage (LLC) remained adequate at 88.5% (Mar ’09: 88.3%).
Stay Underweight. The combined 1Q09 net profit of the six banking
stocks we cover was down 2.1% QoQ, and a sharper 13.1% YoY, on
lower treasury and FX income and higher loan loss provisions. We
expect sector earnings to contract 10% YoY in 2009 and reiterate our
concerns on asset and loan quality as the economy contracts over the
next two quarters. Our analysis shows a 3-6 months interval from GDP
trough to NPL peak. Banks are set to report weaker profits.
Competition in financial sector to intensify gradually. Following the
liberalization of equity ownership requirements in 27 non-financial
services areas last week, the Government announced liberalization
measures for the financial sector yesterday. The ‘gradualist’ approach
does not come as a surprise, as we enter the final phase of the
Financial Sector Master Plan which has laid out a road map for greater
foreign participation by 2010.
Up to seven more foreign owned commercial/Islamic banks. The
liberalization measures encompass three areas, namely:
up to seven new licenses for foreign commercial and Islamic banks
– four in 2009 and three in 2011, which may be 100% foreign
owned, and two more takaful operators;
increase in foreign equity limits in domestic insurance/takaful,
investment banks and Islamic banks to 70% (from 49% previously);
greater operational flexibility for locally-incorporated foreign
commercial banks, mainly in branch openings.
Existing domestic commercial banks’ foreign ownership limit of 30% is
unchanged. Details of the measures are summarized in page 2.
Generally, in line with the “managed” approach in the past, as
opposed to the “Big-Bang” approach. This fits in with the national
development agenda of enhancing contribution of the services sector
as a source of growth, employment, investment and trade, as well as
laying the foundations for the domestic financial services sector to take
advantage of the eventual recovery in the global economy and
investment flows.
Gives local banks “some time” before the “crunch” in 2011. On the
outset, the moves imply increased competition for the domestic
commercial banks. But this will not come immediately as the two new
commercial banking licenses in 2009 to foreign players are for
"specialized expertise", relating to “industry-specific financing” like for
shipping, technology, infrastructure and agro-based. Also, greater
operational flexibility for foreign commercial banks for micro-financing
should not have an immediate material impact on the domestic banks.
In essence, the domestic commercial banks have a 1½ year time frame
to raise their competitiveness and efficiency before the opening of the
banking sector to three world-class commercial banks in 2011.
The liberalisation measures are LT positive in raising Malaysia’s
competitiveness in the financial services sector. We however,
maintain Underweight on the Banking sector. The immediate issues
are on asset quality, as the global and domestic economy head for a
slowdown. We stay concerned over rising NPLs and equity cash calls
to boost core capital (although not needed for now). The main risk is a
more severe and protracted economic downturn, with spikes in
unemployment (3.7% @ end-2008), and asset deflation.
BRSA Consolidated Earnings Presentation, December 31, 2011Garanti Bank
Garanti Bank announced its consolidated financial statements dated December 31st, 2011. In 2011, the Bank reached consolidated total assets of TL 163.5 billion and consolidated net profit of TL 3 billion 346 million. Garanti Bank delivered an ROAE (Return on Average Equity) of 19.5% and ROAA (Return on Average Assets) of 2.2%.
BRSA Bank-Only Earnings Presentation, December 31, 2011 Garanti Bank
Garanti Bank announced its unconsolidated financial statements dated December 31st, 2011. In 2011, the Bank reached total assets of TL 146.6 billion and net profit of TL 3 billion 70 million. Garanti Bank delivered an ROAE (Return on Average Equity) of 18.2% and ROAA (Return on Average Assets) of 2.2%.
BRSA Bank-only Earnings Presentation, March 31, 2012Garanti Bank
Türkiye Garanti Bankası A.Ş. announced its unconsolidated financial statements dated March 31st, 2012. In the first quarter of 2012, the Bank posted an unconsolidated net profit of TL861 million 714 thousand. While Garanti's unconsolidated total assets reached TL 148.5 billion, its contribution to economy through cash and non-cash lending totaled TL 103.7 billion. The Bank delivered an ROAE (Return on Average Equity) of 19.1% and ROAA (Return on Average Assets) of 2.3%.
Mercer Capital's Atlantic Coast Bank Watch | August 2013Mercer Capital
The August 2013 issue of Bank Watch is available now at www.mercercapital.com, and features articles by Jeff Davis, Madeleine Davis, and the announcement of an upcoming webinar on the recently finalized capital rules.
Be realistic, be selective. We believe this market rally has pushed
valuations to the point where growth expectations have reached
implausible levels. In fact, profits have just begun to turn down. We are
not overly bearish – our Buy list is longer than our Sell list – but we
caution that optimism over growth can disappear as quickly as it
appeared. Domestic factors, particularly political developments, may
be a positive catalyst.
Profit recession has just begun. Industrial production peaked in
January 2008, but profits only began a broad-based decline in 1Q09.
Within our coverage, 63% of the companies that have released 1Q
earnings reported lower sequential quarterly net profits. In seven
sectors, our entire coverage list suffered profit contractions. This
suggests the recession in profits has just begun.
Market valuation implies an optimistic view of growth. The market
currently trades at 15.2x 2009 earnings, up from 12x earlier this year.
This is only 10% below the previous cycle’s mid-cycle value, but today,
we face growth of -7.7% (2009) and +9.7% (2010), taking market
earnings only 1% higher by the end of 2010 from its end-2008 level.
Market growth expectations seem to be running ahead of reality.
History tells us the bear market isn’t over. Two previous bear
markets over 1981-86 and 1993-98 lasted 57 and 58 months
respectively. It has now been 17 months from the January 2008
collapse. Those bear markets had 22-38 trend reversals of 5% or more;
we have now seen 12 since January 2008. These comparisons suggest
we are, at best, half way through this bear market.
Bet on Prime Minister Najib, but Sell hope. Our top stock picks are
in the construction sector. We expect PM Najib will deliver on the fiscal
spending promises, reinvigorating the construction and building
materials sectors. Our top Sells are stocks where high hopes and
expectations have been built in; where current prices have run well
ahead of both our and consensus target prices.
Politics a positive wildcard. Beyond rapidly executed fiscal packages,
the country’s new leadership could make further changes to longstanding
policies to attract foreign investment and win back broader
support from all Malaysians. These initiatives should be positive for
equity market at least in the short-term.
• Stable loan growth. The banking industry kept up its loan growth pace of 10.9%
yoy in Mar 09. This was partly driven by a 20-30% jump in loans classified as
“others”, which are loans extended to government agencies and non-bank
financial institutions. Business loan growth decelerated from 10% in Feb 09 to
9.5% in Mar 09 while the growth pace for consumer loans was sustained at 8.8%.
• Lethargic leading loan indicators. Leading loan indicators remained subdued in
Mar 09 – loan applications rose by only 4.8% yoy while loan approvals dipped by
0.7% yoy. The business loan segment was the culprit, with applications and
approvals dwindling 11-13% yoy and offsetting the 13-22% increase in the
indicators for consumer loans.
• Still expecting loan momentum to lose steam. We continue to expect a sharp
fall-off in industry loan growth from 12.8% in 2008 to 2-3% in 2009 given (1) the
sluggish leading loan indicators, (2) slower economic growth, and (3) the downshift
in car sales.
• Sliding lending rates. In response to the OPR cut on 24 Feb 09, banks reduced
their fixed deposit (FD) rates a few days later but BLRs for most banks were
lowered later by about 40bp in early Mar. As a result, FD rates were stable at 2.02-
2.52% but the average lending rate shrank by 105bp yoy and 33bp mom to an alltime
low of 5.16%.
• Ample liquidity. As loan growth of 10.9% outpaced the deposit growth of 8%,
banks’ loan-to-deposit rate tightened to 73.7% as at end-Mar 09 from 70.8% a
year ago. The system still has plenty of excess liquidity estimated to be about
RM219bn in mid-Apr 09 vs. RM216.8bn as at end-Mar 09.
• NPL ratio still improving, for now. Banks’ 3-month net NPL ratio declined by
73bp yoy to 2.2% in Mar 09 but was stable mom. Gross NPL ratio also fell by
154bp yoy and 21bp mom to 4.6%. The reserve coverage improved from 76.5% a
year ago to 86.4%, aided by a 16.9% yoy drop in gross NPLs against a 6.1%
decline in total provisioning.
• Maintain NEUTRAL. We remain NEUTRAL on Malaysian banks as the stillhealthy
banking numbers suggest that banks could perform better than we and the
market expect despite the downbeat economic outlook. Although banks’ net
earnings are estimated to pull back 6.5% this year, we anticipate a 17.4% rebound
in 2010. Over the longer term, many banks will also reap the benefits from their
ongoing revamps and regional expansion. Public Bank remains our top pick for the
sector.
BRSA Bank-only Earnings Presentation, March 31, 2012Garanti Bank
Türkiye Garanti Bankası A.Ş. announced its unconsolidated financial statements dated March 31st, 2012. In the first quarter of 2012, the Bank posted an unconsolidated net profit of TL861 million 714 thousand. While Garanti's unconsolidated total assets reached TL 148.5 billion, its contribution to economy through cash and non-cash lending totaled TL 103.7 billion. The Bank delivered an ROAE (Return on Average Equity) of 19.1% and ROAA (Return on Average Assets) of 2.3%.
Mercer Capital's Atlantic Coast Bank Watch | August 2013Mercer Capital
The August 2013 issue of Bank Watch is available now at www.mercercapital.com, and features articles by Jeff Davis, Madeleine Davis, and the announcement of an upcoming webinar on the recently finalized capital rules.
Be realistic, be selective. We believe this market rally has pushed
valuations to the point where growth expectations have reached
implausible levels. In fact, profits have just begun to turn down. We are
not overly bearish – our Buy list is longer than our Sell list – but we
caution that optimism over growth can disappear as quickly as it
appeared. Domestic factors, particularly political developments, may
be a positive catalyst.
Profit recession has just begun. Industrial production peaked in
January 2008, but profits only began a broad-based decline in 1Q09.
Within our coverage, 63% of the companies that have released 1Q
earnings reported lower sequential quarterly net profits. In seven
sectors, our entire coverage list suffered profit contractions. This
suggests the recession in profits has just begun.
Market valuation implies an optimistic view of growth. The market
currently trades at 15.2x 2009 earnings, up from 12x earlier this year.
This is only 10% below the previous cycle’s mid-cycle value, but today,
we face growth of -7.7% (2009) and +9.7% (2010), taking market
earnings only 1% higher by the end of 2010 from its end-2008 level.
Market growth expectations seem to be running ahead of reality.
History tells us the bear market isn’t over. Two previous bear
markets over 1981-86 and 1993-98 lasted 57 and 58 months
respectively. It has now been 17 months from the January 2008
collapse. Those bear markets had 22-38 trend reversals of 5% or more;
we have now seen 12 since January 2008. These comparisons suggest
we are, at best, half way through this bear market.
Bet on Prime Minister Najib, but Sell hope. Our top stock picks are
in the construction sector. We expect PM Najib will deliver on the fiscal
spending promises, reinvigorating the construction and building
materials sectors. Our top Sells are stocks where high hopes and
expectations have been built in; where current prices have run well
ahead of both our and consensus target prices.
Politics a positive wildcard. Beyond rapidly executed fiscal packages,
the country’s new leadership could make further changes to longstanding
policies to attract foreign investment and win back broader
support from all Malaysians. These initiatives should be positive for
equity market at least in the short-term.
• Stable loan growth. The banking industry kept up its loan growth pace of 10.9%
yoy in Mar 09. This was partly driven by a 20-30% jump in loans classified as
“others”, which are loans extended to government agencies and non-bank
financial institutions. Business loan growth decelerated from 10% in Feb 09 to
9.5% in Mar 09 while the growth pace for consumer loans was sustained at 8.8%.
• Lethargic leading loan indicators. Leading loan indicators remained subdued in
Mar 09 – loan applications rose by only 4.8% yoy while loan approvals dipped by
0.7% yoy. The business loan segment was the culprit, with applications and
approvals dwindling 11-13% yoy and offsetting the 13-22% increase in the
indicators for consumer loans.
• Still expecting loan momentum to lose steam. We continue to expect a sharp
fall-off in industry loan growth from 12.8% in 2008 to 2-3% in 2009 given (1) the
sluggish leading loan indicators, (2) slower economic growth, and (3) the downshift
in car sales.
• Sliding lending rates. In response to the OPR cut on 24 Feb 09, banks reduced
their fixed deposit (FD) rates a few days later but BLRs for most banks were
lowered later by about 40bp in early Mar. As a result, FD rates were stable at 2.02-
2.52% but the average lending rate shrank by 105bp yoy and 33bp mom to an alltime
low of 5.16%.
• Ample liquidity. As loan growth of 10.9% outpaced the deposit growth of 8%,
banks’ loan-to-deposit rate tightened to 73.7% as at end-Mar 09 from 70.8% a
year ago. The system still has plenty of excess liquidity estimated to be about
RM219bn in mid-Apr 09 vs. RM216.8bn as at end-Mar 09.
• NPL ratio still improving, for now. Banks’ 3-month net NPL ratio declined by
73bp yoy to 2.2% in Mar 09 but was stable mom. Gross NPL ratio also fell by
154bp yoy and 21bp mom to 4.6%. The reserve coverage improved from 76.5% a
year ago to 86.4%, aided by a 16.9% yoy drop in gross NPLs against a 6.1%
decline in total provisioning.
• Maintain NEUTRAL. We remain NEUTRAL on Malaysian banks as the stillhealthy
banking numbers suggest that banks could perform better than we and the
market expect despite the downbeat economic outlook. Although banks’ net
earnings are estimated to pull back 6.5% this year, we anticipate a 17.4% rebound
in 2010. Over the longer term, many banks will also reap the benefits from their
ongoing revamps and regional expansion. Public Bank remains our top pick for the
sector.
The majority down. 62% of our 72-stock universe suffered lower
sequential quarterly net profits, with 24% surprising on the downside.
The combined 1Q09 net profit of our research universe fell by just 3.5%
QoQ. But stripping out 5 large gainers, net profits fell a larger 13.6%
QoQ. Consumers and glove manufacturers’ defied gravity, but net
profits of virtually all stocks in nine sectors fell quarter-on-quarter.
A surprising combined result, but the devil is in the details. The
combined net profit of our research universe declined just 3.5% QoQ
despite an overwhelming 62% of companies reporting a sequential
quarterly decline. But excluding five companies, combined net profit fell
13.6% QoQ, an acceleration from previous quarters. A broad-based
earnings decline is being masked by a few companies, including some
monopolies.
Declines in nine sectors, but consumer sector unscathed. Every
stock in nine sectors, excluding monopolies Petronas Gas and KLCCP,
experienced a drop in quarterly sequential earnings. The sectors are
gaming, oil & gas, property, REITs, construction, building materials,
semi-conductors, plantations and toll roads. Consumer stocks and
glove manufacturers showed particular resilience.
An ‘energy dividend’ took effect; monopolies fared well. Lower oil
prices benefited heavy fuel users AirAsia and Tenaga. Their gains were
only partially offset by lower earnings at the oil & gas services
companies. Net profits of Telekom, Tenaga and Petronas Gas, all
effectively monopolies, improved on a quarterly basis although only
Petronas Gas raised prices in 1Q09.
The biggest disappointment and downgrade: 1Q GDP. First quarter
2009 GDP fell 6.2% YoY, against consensus expectations of a 3-4%
drop. We have revised our GDP forecasts to -3.8% in 2009 and +4.0%
YoY in 2010 (previously -1.3% and +3.5% respectively). The
government, to be ahead in the expectations game, is projecting 2009
GDP growth of -4% to -5%. The silver lining is the government is now
under greater pressure to implement its fiscal stimulus plans quickly.
A reversal of fortune ahead for construction, building materials.
Despite uniformly lower earnings this 1Q, we believe the construction
and building materials sectors are only 2-3 quarters away from
improved revenues. Share prices of stocks in these sectors will likely
be driven by newsflow from the fiscal stimulus rather than earnings.
Foreign boys not spared a 20% 1Q earnings decline. The combined net profit
of the five major foreign banks in Malaysia fell 19.7% yoy to RM824.6m in 1Q09,
worse than the 14% slide recorded by the local banks. Clearly, the foreign boys
are not spared the impact of the economic downturn, with earnings dents coming
primarily from (1) a 1.3% yoy drop in net interest income, (2) 25% slump in non-
interest income, and (3) 23% jump in loan loss provisioning (LLP).
• Foreign banks’ loan growth trailing local banks’. As expected, foreign banks
recorded slower net loan growth of 3.1% yoy in Mar 09 compared to 12% for
local banks’ domestic lending. The performance of foreign banks was pulled
down by a 6.8% contraction in Citibank’s loan base, due primarily to a drop in
property and business loans. Other major foreign banks registered single-digit
loan growth ranging from 3.3% (for UOB) to 8.7% (for OCBC).
• Higher NPL ratios and credit costs. Against the backdrop of a grim economic
climate in 1Q09, all major foreign banks saw a rise in their net NPL ratios. The
blended net NPL ratio of these five banks increased from 1.68% in Dec 08 to
1.81% in Mar 09, lower than the industry’s 2.2%. The hike in NPL ratios led to a
23% yoy surge in 1Q09 LLP.
• Better performance by local banks. In 1Q09, local banks outperformed their
foreign peers in the areas of (1) net profit – 14.2% yoy drop vs. 19.7% for foreign
banks, (2) non-interest income – down 7.1% yoy vs. 25.3% for foreign banks
despite their higher exposure to poor investment banking income, and (3) NPL
ratios – a few local banks, i.e. Maybank, Public Bank, AMMB and Alliance
managed to contain their NPL ratios while qoq rises were evident for all the
major foreign banks.
• Maintain NEUTRAL. Foreign banks’ poor 1Q09 financial results reflect the
adverse operating environment. We take heart in the outperformance of the local
banks during these difficult times as it suggests that the improvements in local
banks’ operations, especially in the area of risk management, have helped them
to weather the economic downturn. On this note, we are maintaining our
NEUTRAL stance on Malaysian banks as local banks may trump our and market
expectations in countering the slowdown in loan growth and the uptick in NPLs.
Our top pick for the sector remains Public Bank.
An improved performance. While the results announced by oil & gas (O&G)
companies in Mar-May 09 were a mixed bag, they leaned towards the positive,
unlike the previous quarter. A third of the six companies in our portfolio missed our
forecasts, an improvement on 50% in 4Q08. Half of the companies broadly met our
expectations (4Q08: 17%) and one (17%) surprised on the upside (4Q08: 33%).
Since 1 May 09, the share prices of O&G stocks under our coverage have jumped
by an average 28%, reflecting the overall encouraging reporting season.
• Three trends in 1Q09. 1) Margins picked up as companies climbed the value chain:
Except for Dialog, all the companies in our O&G portfolio showed margin
improvement, with average EBIT margin rising from 14% in 4Q08 to 20% in 1Q09.
2) Late delivery remains a problem for offshore support vessel (OSV) operators: In
total, Petra Perdana and Alam missed six vessel delivery dates due to assembly
line congestion and delayed shipment of parts. 3) Petroleum retailers and refiners
bounced back: The rising crude oil price supports the selling prices of products that
are not subject to automatic pricing mechanism (APM) and refiners benefited from
inventory gains.
• Service providers stand to benefit. YTD, the oil price has jumped 56%, reflecting
factors such as 1) a weakening US dollar, which encourages speculative money to
flow into the market, and 2) an increased risk appetite among investors who
anticipate an economic recovery. As a producing country, Malaysia is poised to
benefit from the upward march of the oil price. Petronas-licensed service providers
offering works and facilities such as yards, tank terminals, offshore structures and
maintenance job stand to win the most.
• Target price increases. There are no changes to our forecasts. However, we are
raising our target prices by 11% for Dialog, Kencana, SapuraCrest and Wah Seong
to reflect our recent index target upgrade. We now apply our revised target market
P/E of 15x to the stocks, instead of 13.5x. Our target prices for Alam, Petra Perdana
and Petronas Dagangan are maintained.
• Kencana replaces Petra Perdana as top pick. YTD, Petra Perdana’s share price
has risen by a whopping 120%, making the stock an outstanding performer in our oil
& gas portfolio. While we still like the stock, we are replacing it with Kencana as our
top pick. We believe Kencana’s newsflow and order book replenishment over the
next few months will be more exciting.
• Maintain OVERWEIGHT. We remain OVERWEIGHT on the oil & gas sector in view
of the potential re-rating catalysts of 1) M&As, and 2) more active newsflow. Also
unchanged are all our stock recommendations and earnings forecasts.
– February results continued the eight month decline in unit sales (avg -2.6%) across fast moving consumer goods (FMGC) as consumers continue to cut back on shopping trips in the U.S..– Additionally, while the percent change in basket ring increased 2.3% in the U.S., they are off from the January increase of 3.9% possibly due to declining prices as many retail channels did see enhanced shopping frequency in the 1st two months of the year – There was a noticeable up tick in store brands, given the 6.4% increase in unit sales across all store brands in the U.S.. This is the highest lift we have seen since August 2008 as the gap between branded items and store brands widened. – Despite the shift to store brands in the US, National Brands in Canada are still holding their share (81.2) as they capitalize on the consumers need for value through increased feature pricing activity. Over the past year unit sales on feature price increased 8% for National Brands to now account for 38.5% of unit sales. PL remained flat reporting a 1% decline in feature price sales.– Canadians are still shying away from multiple store visits. One stop shopping continues to expand – they are making 4% fewer shopping trips but once in store, they are spending 6% more, driven primarily by rising prices.– Expect March sales to be negatively impacted by the seasonal adjustment of Easter, which in 2008 occurred on March 23rd vs April 12 in 2009.
Upping CPO price forecasts. In this report card on the recent results season, we
are raising our CPO price (cif) forecasts by 18% for 2009 and 8% for 2010 to
US$710 per tonne for both years. The reasons for our upgrades are Argentina’s
lower soybean crops, the slower decline in demand growth from key consumers
and a slower-than-expected recovery in palm oil output. Our new local CPO price
forecasts are RM2,280 for 2009 and RM2,250 for 2010.
• CPO price to pull back in 3Q before recovering in 4Q. We remain positive
about CPO price until end-2Q as the replenishment of stocks will require time,
India’s import duties on edible oils remain at zero and there is concern over the
delay in plantings in US. We expect CPO price to pull back in 3Q before
recovering towards the end of the year.
• Upgrading earnings forecasts and target prices. In view of our higher CPO
price forecasts and recent changes in our rupiah assumptions, we are raising our
FY09-10 earnings forecasts for all the planters in our coverage by up to 30%.
This, along with higher target P/Es following our upgrade of regional
stockmarkets, bumps up our target prices by 3-53%. We are raising Hap Seng
Plantations and Sampoerna Agro to Neutral given their recent underperformance.
• Upgrading Malaysian plantation sector to Neutral. We are raising our rating for
the Malaysian plantation sector from Underweight to Neutral as its valuation
premium over regional peers has narrowed following its recent underperformance,
selected plantations stocks will benefit from an increase in their weightings in the
new FBM30 indices on 6 July 2009, we are more bullish on the Malaysian stock
market and foreign shareholding levels have fallen.
• Staying NEUTRAL on regional plantation sector. Despite our CPO price
upgrade, we remain NEUTRAL on the regional plantation sector as the share
prices of most planters in our universe have done well YTD, reflecting the more
upbeat CPO price outlook and expectations of a correction of CPO price in 3Q
due to seasonally higher production and potential cutbacks in demand from major
consuming countries if crop prospects improve. There is also no change to our
Overweight rating on the Singapore plantation sector and Neutral call on the
Indonesian plantation sector. For exposure to the regional plantation sector, we
continue to recommend large-cap liquid planters. Our top picks in the region are
Wilmar, Sime Darby, Indofood Agri and London Sumatra.
Welcome to the 2009 edition of
The Wealth Report, the third such collaboration
between Knight Frank and Citi Private Bank.
Over the past 12 months the economic outlook has
become even more uncertain. Most of the developed
world is now in recession, and even the emerging
economies have been forced to pause for breath. Every
commentator accepts 2009 will be tough. Our Attitudes
Survey (page 12) indicates clearly that HNWIs will look
to protect their wealth from the ravages of the
downturn with an emphasis firmly on security and
transparency rather than risk.
The tangible nature of property means it is well
placed to benefit from this shift in emphasis, and there
are signs that some mature prime property markets,
such as London and New York, have readjusted to price
levels that offer good value for purchasers. For some
emerging markets, the rollercoaster ride looks set to
continue. A full analysis of prime global markets is
included on page 26, and we recommend 10 locations
and sectors that offer potential for growth on page 23.
As property is just one aspect of wealth, we have
expanded the scope of The Wealth Report by including
an investigation into the performance of alternative
assets, from art and cars to wine (page 36), and an
assessment of the state of the philanthropy sector
(page 16). Influential thinkers, such as Alain de Botton
(page 20), also share their views on how the world will
adjust to life post credit crunch.
We hope you enjoy reading the report.
Not as bad as feared. Poor though the results were, the May results season was
not as bad as feared. In fact, there were reasons to be encouraged. The revision
ratio improved from 0.43x in Feb 09 to 0.6x, meaning that the earnings downgrade
momentum is not as lopsided as before. Some 60% of companies met
expectations (43% previously) and 25% failed to deliver (40% before). 15% did
better than expected, a slight pullback from 17% during the Feb results season. In
terms of sector performance, six disappointed while only two were above
expectations.
• EPS forecast surprisingly raised. More significant than the actual number of
companies that surpassed or missed expectations is the fact that 2009 and 2010
EPS have been raised, rather than cut. This is a pleasant surprise. Since the Feb
results season, 2009 EPS contraction has been reduced from 8% to around 6%
while 2010 EPS growth has been raised from 16% to 19%. Upgrades came largely
from the plantation sector due to firm CPO prices, as well as big caps such as
Axiata and Maybank, which more than offset letdowns from smaller caps.
• The worst could be over. In our Apr strategy when we upgraded Malaysia to
Overweight, we thought 2Q could provide a buying opportunity due to 1) the
expected poor results season, and 2) announcement of a sharp contraction in
1Q09 GDP. We were only partially right on the first count as 1Q09 results have
turned out to be not as bad as expected and did not present any major shocks or
earnings downgrades. This means that there is a good chance we are past the
worst as upcoming quarters may be more balanced and EPS cuts could have
bottomed out. Fundamentally, this is hugely positive for the market.
• New KLCI target of 1,220. Although our economics team was spot on about 1Q
GDP being weak – it sank 6.2% – the market took the bad news in its stride. This
is an indication of how far market confidence has improved in the past two
months. We continue to believe the gradual reinvestment of institutional funds’
spare cash will sustain the market rebound in 2H09. In view of the better-thanexpected
1Q results season, continued positive newsflow during PM Dato’ Sri
Najib Razak’s first 100 days in office and the gradual return of foreign funds to the
market, we upgrade our year-end KLCI target from 1,060 to 1,220 points after
removing the 10% discount to its 3-year moving average P/E of 15x. We maintain
our OVERWEIGHT stance on Malaysia and our preference for cyclical bombedout
sectors including construction, building materials, property and oil & ga
We raise our CPO price assumption to RM2,000/t (from RM1,600/t)
on the current high price of RM2,800/t and YTD RM2,178/t average.
We do not foresee CPO prices staying at current levels beyond 2Q due
to rising 2H production and slowing exports. The present CPO price is
81-123% above its long term historical price in USD and Ringgit
equivalents. EPS forecasts are upgraded by up to more than 100% but
company valuations remain stretched. Maintain Underweight.
Recent CPO price spike unsustainable. We view the recent 40%
spike to the RM2,800/t level from an average of RM1,950/t in 1Q09 as
too fast, too furious. Traders and speculators justified the high price on
tight inventory. We think a significant price correction in 2H is imminent
as inventory is expected to build up on slowing exports and stronger 2H
production. Also, the present CPO price is 81% and 123% above its 30-
year long term historical price in USD and Ringgit equivalents of
USD430/t and RM1,257/t respectively.
Bearish 2H price outlook. CPO production, which has disappointed in
1H09 due to poor weather and tree stress, is likely to rebound strongly
in 2H. Besides production recovery, narrowing palm oil discounts
against competing oils should slow exports. A return of normal weather
in the next planting season for South America, and increased trade
protectionism by the West on palm biodiesel are some of the other
bearish fundamental factors for CPO.
Earnings forecasts upgraded. With CPO price having averaged
RM2,178/t YTD and likely to remain high in 2Q on tight supply, we raise
our CPO price assumption from RM1,600/t to RM2,000/t for 2009-11.
This results in EPS upgrades for plantation companies under our
coverage ranging from 17% to over 100% for 2009-11.
Valuations remain expensive. We rate the sector Underweight.
Valuations remain stretched, especially for IOI and KLK which trade at
20.1x and 16.9x 2010 PER. We downgrade Asiatic to Sell (from Hold)
as the stock has soared 54% YTD and is highly leveraged on CPO
price swings. Sime has been raised to Hold (from Sell). Risks to our
price view are a weaker USD, higher energy prices, and further supply
shocks due to weather anomalies.
• 1Q09 adex data point south. Although total gross adex for Jan-Mar 09 shrank
3.9%, it was better than the 20% contraction seen after the 1997-8 Asian financial
crisis. The worst performer was the newspaper segment which saw a 9% decline
compared with a 3.7% growth for TV adex. But ad volume visibility extends only 2-3
months out, leaving question marks over advertising commitments for 2H09.
• Downbeat expectations. The lacklustre adex showing in Jan-Mar 09 ties in with
the 1Q09 results reported by Media Prima and NSTP. It also confirmed the
generally bearish expectations of the media companies since the beginning of the
year, with a few being taken by surprise by the magnitude of the deceleration. Our
previous 2009 projection of an adex range of 1.1% contraction to 6% growth does
not hold and we now revise it to 6-10% adex contraction.
• Newspapers at risk. Fundamental risks could be more severe for newspaper
companies as newspaper adspend continues to take a hit from depressed GDP
data. Although there are signs of resilience in the Malay newspaper segment, this
does not mean total immunity against the potential worsening of adex volume in the
coming months. The top Malay newspaper NST’s Harian Metro is the main winner
but this is not expected to help the group much given that Harian Metro is a small
contributor.
• Indicators leading at inflection point? We concur with our economic research
team’s view that the CLI could hit the trough in Jun-Aug 09 and that the economic
recovery from the trough is likely to take at least 12 months given the severity of the
current global crisis. Advertisers should reposition their spending for a gradual
recovery from 2010. Historical trends suggest that adex in Malaysia should recover
in 1Q2010 based on a 3-6 months’ lag period.
• End-2009 a good potential entry point. We believe end-09 will be a good re-entry
point for exposure to selected media stocks as positives such as earnings visibility,
improved sentiment of advertisers, cheaper newsprint and gradual economic
recovery are likely to kick in as catalysts then. We will monitor closely the situation
on the ground and official stats but so far, adex for the months ahead appears to be
southbound. The share prices of media companies have recovered somewhat since
the start of the year and we fail to see any additional near-term re-rating catalysts.
• Staying NEUTRAL on media sector for now. In view of this, we maintain our
NEUTRAL stance on the media sector but recommend investors to switch to Astro
(Trading Buy) which has very little exposure to adex and minimal downside risks to
its Malaysian operations where the subscriber trend could turn out to be resilient.
We remain NEUTRAL on Media Prima (MPR MK), Star Publications (STAR MK)
and Media Chinese International (MCIL MK). NSTP is kept as an
UNDERPERFORM
• Palm oil stocks at 22-month low but… Malaysia’s palm oil stocks fell for the fifth
straight month to a 22-month low of 1.29m tonnes at end-Apr 09 as exports and
domestic consumption exceeded domestic palm oil production.
• … at high end of expectations. Stocks fell 5.4% mom to 1.29m tonnes, which is at
the high end of market expectations ranging from 1.2m tonnes to 1.3m tonnes. The
decline in inventory is bullish for CPO price as it suggests tight palm oil supplies for
Malaysia, a key palm oil producer.
• Stock level may have hit trough in April. Our rough modelling, which assumes
the mom growth pattern for production and exports in the month of May will be
similar to the historical 3-year average growth pattern, suggests that Malaysia’s
CPO stocks could rise 5% mom to around 1.35m tonnes in May due to higher
production and lower exports.
• CPO price forecast intact. For the first four months of the year, average CPO price
fell 41% yoy to RM2,031 per tonne. This is marginally higher than our 2009 CPO
price forecast of RM1,950 per tonne due to lower-than-expected soybean harvests
from Argentina and weaker palm oil production from Malaysia and Indonesia. We
maintain our view that CPO prices will remain firm in the next few months due to
current tight supplies and potential further downgrade in Argentina soybean
harvests but are likely to trend lower in 3Q when palm oil supply improves and
demand weakens due to the higher selling prices. That said, the recent CPO price
strength has taken us by surprise due to deteriorating soybean crop prospects for
Argentina. In view of lower-than-expected yields, Oil World has cut its current-year
soybean crop estimates for Argentina by a further 1.5m tonnes to 33m tonnes last
week or a decline of 28.5% yoy. Although we are not changing our CPO price
forecasts of RM1,950 per tonne for 2009 and RM2,150 per tonne for 2010, there is
RM100-200 potential upside to our forecast for 2009 in view of the recent
downgrade of soybean supply from Argentina.
• Maintain UNDERWEIGHT. Our earnings forecasts for all the Malaysian planters
remain intact, along with our UNDERWEIGHT stance on the Malaysian planters due
to their expensive valuations relative to their regional peers. Potential de-rating
catalysts for the Malaysian planters are falling CPO price in 3Q, lower crude oil price
and improved weather prospects in major planting areas. Our only pick in the
Malaysian plantation sector is Sime Darby as the stock stands to benefit from the
move towards the new FBM 30 index, has the lowest P/E multiple and foreign
shareholding among the three largest big-cap planters in Malaysia and may engage
in earnings-enhancing M&As. We maintain our preference for the Singapore-listed
planters.
• Some glimmers of hope… Rays of hope are permeating the semiconductor
industry, which probably saw most of the bad news in 1QCY09. Global chip sales
improved slightly in Mar 09 with a 30.0% yoy decline compared with a 30.1% yoy
fall in Feb 09. The book-to-bill ratio has ticked up with preliminary Mar 09 numbers
hitting 0.61x, up from Feb 09’s abysmal 0.47x. Finally, utilisation rates have scraped
bottom as some production facilities have been shuttered and inventory control is
being exercised. The end-user markets appear to have troughed, with PC and
handset sales probably hitting the bottom. Furthermore, trade credit is now
normalising. That said, stabilisation does not equate to a recovery and we believe
that restocking activity as inventory runs low is the primary factor in the improving
outlook. We still expect 2009 to be a difficult year where the typical seasonal pick up
in 3Q may not materialise given the current re-stocking activities.
• …but no full-blown recovery until 2010. We argue that a true recovery will only
take root when the global economy begins to move upwards. A meaningful and
sustained recovery will only take place when consumer sentiment and spending
spring back to life and cause ASPs to start rising. We believe that a more
convincing uptrend will take hold only from 2H10 onwards.
• Global economies to start stabilising towards year-end. Our economists believe
that the world economy will feel the full impact of the global financial crisis this year.
Although the process of sorting out the financial system will take time and
resources, the cumulative effects of sizeable fiscal stimuli and aggressive monetary
easing globally will work to provide some stability. Recent global indicators are less
negative. Considering the extremely low base this year, global growth should pick
up in 2010 but will probably fall short of its long-run average growth rate of 3.7%.
• Upgrade sector to TRADING BUY. While the fundamentals for the sector remain
uncertain, we think that downside to share prices is limited as valuations are still
below trough levels. We upgrade the sector from Underperform to TRADING BUY.
Furthermore, in line with our market strategy, we think that investors’ risk appetite is
increasing and higher beta plays such as semicon should be in vogue. Investors
should start picking up semicon stocks ahead of the recovery of the sector as
historically, the share prices for both MPI and Unisem cratered 13-18 months before
the upturn of the sector. Sector catalysts include a) a sooner-than-expected revival
of end-user demand and b) a faster-than-expected economic recovery.
• Upgrade Unisem and MPI to Trading Buy. In tandem with the sector upgrade, we
upgrade MPI and Unisem from Underperform to Trading Buy. We raise our target
prices for both after cutting our discounts to their 5-year historical average by 30-
60% pts to 20-40% for Unisem and MPI respectively. We assign a lower discount to
Unisem, our top pick, as its higher liquidity and beta make it a better play on a
market rebound. Re-rating catalysts include a) qoq improvement in earnings, b)
revival of end demand and c) the higher betas on offer.
We expect transactions to fall and prices to ease in 2009, in line with the projected 3%
real GDP contraction. Transactions could fall 20-30% or as much as 35-50% in the
worst-case scenario, matching the performance during the 1997/8 Asian financial
crisis. However, most major developers have pushed out innovative financing
schemes to lure buyers. Response has been mixed, with good response garnered by
the likes of SP Setia (RM500m sales) and Mah Sing (RM170m sales) but lacklustre
sales for many other developers
More excitement ahead. The eventual award of the RM1.3b Pahang-
Selangor raw water transfer tunnel works on 28 Apr confirms that the
new administration sees the urgency for construction in stimulating the
economy. Langat 2 should be next in the limelight, together with the
massive Klang Valley LRT system. We expect more positive news flow
over the near-term. Continue to Overweight Construction.
Langat 2 next. Langat 2, the downstream portion of the water transfer
project, comprises a 2,180 mld treatment plant and the distribution
pipelines. The estimated RM5b construction contract was awarded in
Feb ’08 to Kumpulan Darul Ehsan, which holds 60% of Kumpulan
Perangsang Selangor (KPS). As KPS does not have a major
construction arm, we think that potential beneficiaries are Gamuda, Loh
& Loh and Taliworks, which have had working experience with, and/or
are affiliated to KPS via shareholdings.
Klang Valley LRT to follow. Local companies have been invited to
submit “expressions of interest” for the LRT extension and upgrading
works, with the government keen to see construction works start within
the next 3-4 months, according to today’s Edge. The extension works
could cost RM7b, including RM1b to buy rolling stocks. Our view is that
the project may be parcelled out and experienced contractors like IJM,
Gamuda, UEM Builders and YTL Corp may bid as turnkey contractors.
Overweight Construction. We continue to expect mid-sized projects
to lead the momentum of construction sector recovery under the fiscal
stimulus. Meanwhile, the inter-state water transfer (including Langat 2)
and Klang Valley LRT extension are also two priority projects under the
9th Malaysia Plan with works expected to start before the decade turns.
IJM, WCT and HSL remain on our Buy list. Meanwhile, Gamuda is a
strong contender for the two mega water and LRT projects. Our Hold
call on the stock is under review, with upward revision potential.
• Extended wedge formation. We were expecting the DJIA to break down from its
wedge formation last week but it continued to rise further towards the 8,300 levels
before correcting end of last week. The Index could still be in an extended wedge
formation and the breakdown the wedge support trend line at the 8,100pt would
confirm the end of this pattern.
• If we are wrong… If we are wrong, our alternative wave count shows that DJIA
could have already started its minor wave “c” up leg after completion of the wave
“b” triangle consolidation since early Apr last week (refer to chart below). This wave
count is supported by the breakout of the major resistance trend line since Nov-08.
Confirmation of this alternative wave count if DJIA breaks above 8,300pt.
• US banking stocks remains in consolidation phase. If banking stocks are
leading the market, DJIA is still in an extended wedge formation. The KBW Bank
Index has just broken down below its uptrend channel support trend line since
early-Mar. This indicates further consolidation in the immediate term for the Index.
• Crude oil uptrend is not over. We were looking for crude oil prices to break down
last week but the price has since bounced back above the US$53/barrel levels.
This has negated our preferred wave count and a likely “double zig-zag” is taking
place, targeting the US$60-70/barrel levels in 2H09.
• Channel breakout. MSCI Asia ex-Japan Index (MAxJ) only experienced a mild
correction last week and closed strong for the week at 336. The Index just broke
out of its channel resistance trend line since Nov-08. This is a positive sign if the
Index is able to hold above this trend line over the next few weeks.
• Still expect consolidation. However, we still expect Asian equity markets to
consolidate over the next few weeks to build up a support base before charging up
in June-July. If RSI breaks out of its current consolidation range, this would likely
indicate that Asia has kick started its next up leg towards the June-Jul period.
A milestone for the sector. We take a positive view of this news as it is a significant
milestone for the water sector. The timing of the award was a slight surprise as we
had expected the recent cabinet reshuffle to result in a slight delay for the project
award following the award of the letter of intent (LOI) to the Shimizu consortium a few
months back. The water transfer project is the first mega job to be rolled out under the
9MP after the announcement of the second stimulus package in Mar 09. Our channel
checks indicate that the tunnelling job will move fairly quickly from here on and the
notification to start work should be received in a matter of days. Once site possession
is obtained, major resource mobilisation will be underway, including Shimizu’s
positioning of the tunnel boring machine (TBM) near the Titiwangsa range. We think
that actual work could start within a month, suggesting a mid-2014 timeframe for
completion of the project.
No details on scope of works. Details of the scope of works are not available. IJM’s
share of works based on its 20% stake works out to RM260m or just RM26m profit
enhancement assuming a 10% pretax margin. We are not revising our earnings
forecasts as the RM260m share of works is already part of our assumption for new
contracts for IJM. That said, the award of the project raises IJM’s profile as it is one of
the main contractors of the country’s largest water infrastructure project.
Focus will now shift to the remaining major components of the water transfer project,
i.e. the Kelau dam and the Langat 2 water treatment plant. We expect the feasibility
studies for both to be concluded sometime in early 2H09, making way for the
tendering process. We gather that the Shimizu consortium is eyeing the Kelau dam
job which has an estimated value of roughly double the tunnelling job. This suggests
that IJM’s potential share of works could be more than RM500m.
Welcome relief but maintain cautious outlook. Mar ’09 total adex
recorded a much lower YoY contraction of 1% (Feb ’09: -13% YoY)
driven by TV (+13% YoY). Despite this reprieve, the high 2Q08 and
3Q08 total adex base will be difficult to repeat due to lack of adex
friendly events this year. We downgrade Star and Media Prima to Sell
as valuations have run ahead of fundamentals.
TV adex rebounded... Mar ’09 TV adex rose by 13% YoY driven by
higher rates at Media Prima’s TV stations (TV3, 8TV, ntv7 and TV9)
effective 1 Feb ‘09. Due to the strong showing, YTD Mar ’09 TV adex
rose 4% YoY.
… but total adex fell. Mar ’09 total adex eased 1% YoY due to the
high base set in the preceding year by the 2008 General Election adex
of RM19.6m and continued deterioration in newspaper adex (-9% YoY).
Mar ’09 represents the sixth consecutive month of YoY newspaper
adex contraction. YTD Mar ’09 total adex was down 4% YoY,
One swallow does not make a spring. While we welcome the better
showing in Mar ’09, we believe that this momentum is unsustainable.
The high adex base of RM2.7b from May ’08 to Sep ’08 was fuelled by
Euro 2008 and the Beijing Olympics adex. Due to the lack of adex
friendly events and weak economic outlook this year, it will be difficult
to repeat this feat. We maintain our total adex forecast of -3% for now.
Sell Star and Media Prima. We raise Astro and NSTP target prices to
RM2.70 and RM0.95 on a lower WACC of 10.4% and 11% (13%
previously) but maintain our Hold and Sell calls respectively. We
downgrade Star and Media Prima to Sell as we believe their share
prices have run up ahead of fundamentals. The media sector is now
downgraded to Underweight from Neutral.
Bank Negara announced yesterday measures for further liberalisation of the financial
sector:
Increase in foreign equity limits. The foreign equity limit for investment banks,
Islamic banks, insurance companies and takaful operators has been raised from 49%
to 70%. It is envisaged that these institutions’ business potential and growth prospects
will be enhanced by the international expertise and global networks of foreign
shareholders. However, the cap on foreign shareholdings in domestic commercial
banks remains at 30%.
New banking and Takaful licences up for grabs. New licences will be issued to
strong and world-class players in the following categories:
• In 2009, up to two new Islamic banking licences will be issued to foreign players to
establish new Islamic banks with paid-up capital of at least US$1bn.
• In 2009, up to two new commercial banking licences will be issued to foreign
players that will bring in specialised expertise.
• In 2011, up to three new commercial banking licences will be dished out to worldclass
banks that can offer significant value propositions to Malaysia.
• In 2009, up to two new family takaful licences will be made available.
Greater operational flexibility for foreign banks. Locally-incorporated foreign
commercial banks can establish up to 10 microfinance branches with immediate
effect. Further branches will be considered based on the effectiveness of these
branches in servicing microenterprises. Foreign banks will also be allowed to establish
up to four new branches in 2010 based on the distribution ratio of 1 branch in market
centres, 2 in semi-urban areas and 1 in non-urban areas.
Locally-incorporated foreign insurance companies and takaful operators are now
allowed to set up branches nationwide without restriction. The restriction against these
companies entering into bancassurance/bankatakaful arrangements with banking
institutions has been lifted.
Other liberalisation. Banks, insurance companies and takaful operators now have
greater flexibility to employ specialist expatriates with expertise to continue the
development of Malaysia’s financial system. Offshore financial institutions that meet
the predetermined criteria will be given the flexibility to have a physical presence
onshore – from 2010 for banking institutions and from 2011 for insurance companies.
Comments
Liberalisation well expected. The further liberalisation of the financial sector is within
our and market expectations as it is in line with the objectives laid out in the Financial
Sector Master Plan (FSMP) issued in 2001. Furthermore, the government has alluded
to announcements on this matter this week.
Upping foreign equity limits for Islamic and investment banks... However, it is a
surprise to us that Bank Negara has increased the foreign equity limits for Islamic and
investment banks from 49% to 70% as this means that foreigners will control these
entities. It appears that the authorities view the relaxation as necessary to attract more
foreign players into the Malaysian market to help develop these segments.
…but not for commercial banks. We are also surprised that the government did not
increase the 30% foreign equity limit for domestic commercial banks, which is
something the market had been looking forward to. An increase in the equity limit for
• B-Toto is worth a bet now as i) its core gaming operations remained resilient even
during the post-CNY off-peak period and appear likely to surpass our 6-7% gaming
revenue growth target for FY4/09, ii) 2009’s special draw allocations for all three
NFOs could take place over the next few weeks and iii) there is upside potential to its
6-8% gross dividend yield based on its policy of a minimum payout of 75% if B-Toto
dishes out higher dividends to lend its parent a helping hand.
• Adjusting earnings but implied yields still decent. We raise our FY09-11’s
revenue per draw growth assumptions by 2-4% pts following the stronger-thanexpected
YTD showing. But FY10-11’s bottomline is lowered by 4-5% as we also
raise our blended prize payout assumption from 62-64% to 63-64% to better reflect
the payout trends seen so far. FY09’s numbers are largely intact despite these
adjustments. Even after a 3-5% cut in our FY10-11 DPS projections (unchanged
80% payout ratio), our forecasts still imply a decent yield.
• Reiterate OUTPERFORM. Our DPS downgrades trim our end-CY09 target price
from RM5.95 to RM5.65, based on an unchanged 5% discount to its DDM value. We
continue to like B-Toto for its steady, low-risk topline growth, superior ROEs and
sustainable dividend yields. Being a low-beta stock, B-Toto may fall out of favour in a
rising market. However, we flag the likelihood of bumper dividends over the short
term. This is a potential share price catalyst that underpins our OUTPERFORM
recommendation, along with the normalisation of luck factor and market share gains.
Harking back to the SARS nightmare? The surgical masks, empty stadiums and
deserted streets of Mexico’s cities remind Asians of the devastating outbreak of the
SARS avian flu in east Asia in early 2003.
Yesterday, aviation stocks responded to those fears. Singapore Airlines’ share price
declined 4.5%, Malaysia Airlines fell 3.8%, AirAsia dropped 8.8%, Thai Airways
corrected 6.9%, and Cathay Pacific (Not rated) fell 8%. Airport shares also dropped,
but not by as much. Airports of Thailand fell 2.1%, while Malaysia Airports (Not rated)
fell 0.6% yesterday.
The current swine flu outbreak in Mexico has already killed more than 100 people and
has spread to neighbouring US and Canada. The World Health Organization said that
the outbreak has “pandemic potential” and has rated the seriousness of the outbreak
as a 3 on the scale of 1 to 6, with 6 being the most severe. US President Obama said
that the swine flu outbreak is a "cause for concern and requires a heightened state of
alert…but is not a cause for alarm".
If the outbreak turns into a global pandemic, aviation could be hit by a sudden
collapse of travel demand. During SARS, Singapore Airlines’ passenger numbers fell
50% yoy in Apr 03 and 60% yoy in May (Figure 1) while Cathay Pacific’s passenger
traffic plunged by as much as 75% in May (Figure 2).
Malaysia Airlines saw a 40% yoy fall in international passengers in May 2003 although
domestic traffic was relatively more resilient, pulling back a maximum 25% yoy
(Figures 3 and 4). AirAsia also experienced a sudden demand fall during that period,
although official numbers are unavailable as the company was not listed then.
In Thailand, Airports of Thailand saw international passengers through its 5 airports
plunge 43% yoy in April 2003 and 48% yoy in May while domestic traffic retreated
15% yoy in April and 14% yoy in May (Figures 5 and 6).
Bank Negara: Tan Seri Dr Zeti Akhtar Aziz, pointed out that OPR had been
“front-loaded”. Zeti indicated that, there will not be any further OPR rate cuts
provided in improvement is seen in the second half of the year and further
improvement going into next year. Zeti expects the global and domestic
economies to improve by the second half of the year. (Source: The Edge Daily)
Axiata: Announcement of Headline KPIs for FY08. Axiata failed to achieve its
FY08 KPIs targets, citing increasing competition in the mobile market of Axiata’s
operating countries, currency volatility, liquidity shortages, and fluctuation of
interest rates. Axiata did not meet its target for revenue growth, EBITDA margin
and ROE for FY08. (Source: Bursa Announcement)
Ramunia: Currently engaging in preliminary discussion with Sime Darby
Engineering Sdn Bhd as a strategic partner. Ramunia and Sime Darby
clarified in an announcement that, they are in engaged in a discussion on a
potential corporate transaction as part of Ramunia’s search for a strategic
partner. (Source: Bursa Announcement)
Air Asia: Eyeing new associates in the Philippines and Vietnam. Datuk Seri
Tony Fernandes is keen on setting up affiliate airlines in the two countries. He
envisioned all AirAsia affiliates in Asean to become a single entity, ultimately.
(Source: Business Times)
G-7: Says strength of recovery depends on clean-up of banks' toxic
assets. In warning that the world economy could still take another turn for the
worse, the finance ministers and central bankers who met over the weekend in
Washington singled out the banks' impaired balance sheets as the biggest threat
to a sustainable recovery. Their remarks indicate it will be critical to follow
through on commitments to deploy taxpayer funds to buy distressed assets,
even as some gauges of financial stress ease. U.S. officials aim to finance the
purchases of as much as USD 1tr of loans and securities, and Germany is
pushing a plan to remove EUR 853b (USD 1.1tr) from balance sheets. (Source:
Bloomberg)
Mexico: Swine flu outbreak may deepen economic decline. The outbreak of
deadly swine flu may curtail tourism and compel shoppers to stay home, further
damaging an economy already reeling because of a U.S. recession that has cut
demand for exports. President Felipe Calderon closed Mexico City schools until
May 6, shut public events and declared emergency powers to order quarantines
to fight the flu, which has killed as many as 103 in Mexico. Finance Minister
Agustin Carstens said there’s “high potential” the outbreak will disrupt the
economy, with hotels and restaurants being the hardest hit. (Source: Bloomberg)
Germany: GfK consumer confidence holds steady for a third month in May
as slower inflation boosted household purchasing power and the recession
showed first signs of easing. GfK AG’s confidence index for, based on a survey
of about 2,000 people, was unchanged from April at 2.5%, the Nurembergbased
market-research company said in a statement. German business and
investor confidence increased this month on hopes that interest-rate cuts and
government stimulus packages will lift the economy out of its worst recession in
over six decades. Germany’s leading economic institutes predict the economy,
Europe’s largest, will shrink by 6% YoY this year. (Source: Bloomberg)
Ireland: Banks may report EUR 22.5b of loan losses. Ireland’s government is
preparing to buy EUR 90b (USD 119b) of property loans in a bid to stave off
nationalizing its biggest lenders. It may still end up with majority control of the
country’s banks. Companies led by Allied Irish Banks Plc may get 25% less than
the face value of their loans under the proposal from the National Asset
Management Agency, according to the median estimate of seven analysts
surveyed by Bloomberg News. That implies losses of EUR 22.5b. Analyst
estimates for the discount ranged from 15% to 30%. (Source: Bloomberg
• Momentum halted US equities indices were in a +/-1% range, after Treasury
Secretary Geithner said the “vast majority” of banks have enough capital and
comments allayed concerns about next month’s “stress test” results, after an earlier
leak indicating otherwise. Big European banks also reported a brighter 1Q09 results or
guidance. Regional markets were mixed, with profit taking in Indonesia, Hong Kong
and Singapore, while Thailand and Malaysia were up.
• 14 painful years to breakeven at 5.4% p.a. Based on the available sample of MSCI
FExJ data, the long term capital returns for the MSCI FExJ markets works out to 5.4%
p.a. Including dividends, the total returns go up to 8.4% to 9.4%. The bad news is that
at this rate, it would take 14 miserable years before breakeven is achieved for
investments made at the October 2007 market.
• But 6.8% is probably more accurate The good news is that the 8.4% to 9.4% p.a.
returns is likely to be an underestimation of the potential returns of Asian equities. A
sanity check based on the historical cost of equity and the underlying ROE of the
countries under our coverage suggests that the long term returns are likely to be in the
10-18% range. Adding a trendline – albeit crude – to the FExJ index throws up an
implied 6.8% p.a. long term capital returns, or close to 12% total returns if dividends
are accounted for. This is also consistent with the long term returns of 10.7% that have
been documented for US equities.
• Juicing the returns beyond long term returns Returns are determined by the timing
of entry into the market. By definition, markets tend to oscillate around the long term
trendline. The FExJ index is currently below the trendline of its long term growth profile,
as expected. If investors are accurately discounting the GDP turning point that is
months away, risk tolerance should improve and equities should continue its march
upward. A reversion to the long term growth profile of the FExJ markets by the end of
this year implies an annualised return of 52%, while a less optimistic view of a
reversion only by the end of next year produces annualised returns of 24%. At 3.5x and
7.6x long term returns on conservative forecasts, the timing factor favours investors.
Abhay Bhutada Leads Poonawalla Fincorp To Record Low NPA And Unprecedented Gr...Vighnesh Shashtri
Under the leadership of Abhay Bhutada, Poonawalla Fincorp has achieved record-low Non-Performing Assets (NPA) and witnessed unprecedented growth. Bhutada's strategic vision and effective management have significantly enhanced the company's financial health, showcasing a robust performance in the financial sector. This achievement underscores the company's resilience and ability to thrive in a competitive market, setting a new benchmark for operational excellence in the industry.
BYD SWOT Analysis and In-Depth Insights 2024.pptxmikemetalprod
Indepth analysis of the BYD 2024
BYD (Build Your Dreams) is a Chinese automaker and battery manufacturer that has snowballed over the past two decades to become a significant player in electric vehicles and global clean energy technology.
This SWOT analysis examines BYD's strengths, weaknesses, opportunities, and threats as it competes in the fast-changing automotive and energy storage industries.
Founded in 1995 and headquartered in Shenzhen, BYD started as a battery company before expanding into automobiles in the early 2000s.
Initially manufacturing gasoline-powered vehicles, BYD focused on plug-in hybrid and fully electric vehicles, leveraging its expertise in battery technology.
Today, BYD is the world’s largest electric vehicle manufacturer, delivering over 1.2 million electric cars globally. The company also produces electric buses, trucks, forklifts, and rail transit.
On the energy side, BYD is a major supplier of rechargeable batteries for cell phones, laptops, electric vehicles, and energy storage systems.
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
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Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the what'sapp contact of my personal pi merchant to trade with.
+12349014282
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the what'sapp contact of my personal pi vendor
+12349014282
5 Tips for Creating Standard Financial ReportsEasyReports
Well-crafted financial reports serve as vital tools for decision-making and transparency within an organization. By following the undermentioned tips, you can create standardized financial reports that effectively communicate your company's financial health and performance to stakeholders.
How to get verified on Coinbase Account?_.docxBuy bitget
t's important to note that buying verified Coinbase accounts is not recommended and may violate Coinbase's terms of service. Instead of searching to "buy verified Coinbase accounts," follow the proper steps to verify your own account to ensure compliance and security.
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the what's app number of my personal pi vendor to trade with.
+12349014282
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
1. Equity Research
PP11072/03/2010 (023549)
Sector Update 5 June 2009
Banking NPLs yet to peak. Underweight
Underweight (unchanged) Be cautious into 3Q. 1Q09 results of the six banking stocks we cover
were generally in line, with combined net profit down 2.1% QoQ and
13.1% YoY. However, the weak 1Q09 GDP suggests growing stress in
system loans over the coming months. We remain cautious on banks’
profits, especially from 3Q09. Underweight the sector.
Wong Chew Hann, CA 1Q down a sharp 13.1% YoY. Other than AMMB’s positive surprise,
wchewh@maybank-ib.com
results were generally in-line. The combined net profit of our banking
(603) 2297 8686
universe was flattish QoQ but fell a sharp 13.1% YoY on lower treasury
and FX income and higher loan loss provisions. Net interest income
expanded, but the weak equity market continued to affect brokerage
income, which contracted for the 5th to 6th consecutive quarter.
Some signs of stress. Domestic loans continued growing at most
banks. QoQ loan growth at the major banks (Maybank, CIMB Bank and
Public Bank) outpaced system growth. Some loan segments, however,
have begun showing stress. Domestic NPL saw upticks in the
consumer (mortgage, autos) and working capital segments. Net NPL
ratios continued to trend down due to the expanded loans base.
Earnings to contract. There were no major revisions in our individual
earnings forecasts except for AMMB (FY09: +16%, FY10: +7%). Our
combined net profit forecast was upgraded by a marginal 0.1% for 2009
and 0.7% for 2010. We expect sector earnings to contract 9.9% in
2009, before recovering to 6.8% growth in 2010 (previously -10.1%,
+6.1% respectively). This excludes further impairment in the value of
long-term investments, merger costs and other one-offs.
Asset quality concerns. 1Q09 GDP (-6.2% YoY, -7.7% QoQ) should
be the weakest, suggesting that the worst may be over. However, we
expect economic recovery to be slow, with real GDP to return to the
3Q08 high only in 4Q10. There is a 3-6 month interval from GDP trough
to NPL peak. Hence, banks are set to report weaker profits on rising
NPLs and higher credit charges from 3Q09.
Mainly Sells. Against regional peers, the larger Malaysian banks are
pricey. The current liquidity driven market has pushed valuations up but
prospects for a strong economic recovery stay hazy. Sell into strength.
Banking Sector – Peer Valuation Summary
Stock Rec Shr px Mkt cap TP PER (x) PER (x) P/B (x) P/B (x) ROAE ROAE Gross Gross
(%) (%) yld yld
(RM) (RMm) (RM) CY09E CY10E FY09E FY10E CY09E CY10E FY09E FY10E
Maybank * NR 5.50 38,927 NR 15.4 16.0 1.4 1.4 8.8 8.5 4.5 4.5
BCHB Sell 8.65 30,950 6.80 16.3 15.4 1.7 1.6 10.7 10.4 2.1 2.3
Public Bank Sell 8.75 30,904 7.60 13.0 12.6 2.8 2.5 22.3 20.7 5.7 6.3
RHB Cap Hold 4.18 9,002 4.30 10.6 9.9 1.1 1.0 10.5 10.4 3.8 4.1
AMMB Hold 3.36 9,149 3.30 12.0 11.6 1.2 1.1 10.0 9.2 2.4 2.7
EON Cap Sell 4.00 2,773 3.40 13.4 12.2 0.8 0.8 6.3 6.6 2.5 2.5
HL Bank * NR 5.70 9,007 NA 10.8 10.5 1.6 1.4 15.7 13.6 3.9 4.0
AFG * NR 2.12 3,282 NA 10.7 9.9 1.1 1.1 11.8 10.4 3.0 3.2
Affin Hldgs * NR 1.74 2,600 NA 11.4 10.1 0.6 0.5 5.4 5.7 2.8 2.7
Sector (weighted) 136,594 13.7 13.3 1.4 1.3
* Consensus; Source: Maybank-IB
2. Banking
An uninspiring 1Q
No major surprises, flattish QoQ. There were no big surprises in the
1Q09 results of the Malaysian banks, with combined net profit being
flattish QoQ, but down YoY. AMMB’s final result for FY09 was above
expectations due to lower impairment loss on investments. Combined
net profit of the six banking groups in our coverage universe was down
2.1% QoQ, and a sharper 13.1% YoY on lower treasury and FX income
and higher loan loss provisions. Net interest income continued to
expand. Combined core net profit was up 2.3% QoQ, but it was still
down 7.9% YoY. Some loan segments were beginning to show stress.
Combined Earnings (RM m)
Flattish sequential
4,000 profits, but down YoY
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09
Pre-tax profit Core net profit Net profit
Note: Comprising Maybank, BCHB, Public Bank, RHB Cap, AMMB and EON Cap
Sources: Companies, Maybank-IB
1Q08 Net Profit
Net profit YoY QoQ vs. Maybk-IB’s Comments (1Q09 vs. 4Q08)
(RM m) expectations
Maybank 503 -33.7% -31.5% NA 1Q09 affected by: i) higher mark-to-
market loss on securities and
derivatives (interest rate swap), ii)
lower net forex gain, iii) higher loan loss
provisions, iv) impairment losses on
investments.
BCHB 614 +14.7% +92.7% Within Strong treasury income in 1Q09 (4Q08
affected by one-off M&A related
charges).
Public Bank 589 +2.9% -9.9% Within Combined net interest and Islamic
banking income marginally down
mainly due to lower NIM from loan-
deposit repricing gap.
RHB Cap 229 +2.8% +16.1% Within Stronger QoQ due to lower loan loss
provisions and leaner opex.
AMMB 180 -17.3% -27.5% Above Preceeding quarter included RM95.5m
gain from sale of 19% stake in general
insurance business.
AMMB core 180 -17.3% +17.9% Investment income improved QoQ,
while loan loss provisions were lower.
EON Cap 80 +4.2% -10.6% Within Weaker QoQ due to lower NIM, and net
forex loss.
Total 2,194 -13.1% -2.1% - -
Total core 2,194 -7.9% +2.3% - -
Sources: Companies, Maybank-IB
5 June 2009 Page 2 of 12
3. Banking
Combined Operating Income (RM m)
6,000
5,000
4,000
3,000
2,000
1,000
0
2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09
Net interest inc Non-interest inc Islamic banking inc
Note: Comprising Maybank, BCHB, Public Bank, RHB Cap, AMMB and EON Cap
Sources: Companies, Maybank-IB
Net interest income expanded, mixed impact from OPR reduction.
Combined net interest income grew 1.7% QoQ and 13% YoY, boosted
by the consolidation of BII at Maybank from 4Q08 and BankThai at
BCHB from 1Q09. The 150 bps cut in the central bank’s overnight
policy rate (OPR) since Nov 08 had a mixed impact on 1Q09’s net
interest margins (NIM) – negative at Public Bank, AMMB and EON Cap
(due to the loan-deposit repricing gap), neutral at RHB Cap, but
positive at Maybank and BCHB (higher spreads for loans). NIM
expansion at the Indonesian subsidiaries also raised overall NIM at
Maybank and BCHB.
1Q09 Net Interest Income (excluding Islamic banking income)
Net Int Inc (RM m) YoY QoQ NIM (QoQ)
Maybank * 1,543 14.4% -0.3% 2.79% (+8 bps) /
2.57% (+2 bps) ex-BII
BCHB # 1,407 25.0% 9.4% 2.6% (+10 bps)
Public Bank 959 7.2% 0.7% 2.4% (-10 bps)
RHB Cap 574 8.2% 0.2% 2.7% (unchanged)
AMMB 445 3.8% 0.6% 2.99% (-8 bps)
EON Cap 224 -3.5% -16.1% 2.64% (-20 bps)
Total 5,152 13.0% 1.7% -
* Consolidation of BII effective 4Q08. Excluding BII, we estimate net interest income
contracted 6.2% YoY and 3.1% QoQ due to higher interest cost for new acquisitions.
# Consolidation of BankThai effective 1Q09. Excluding BankThai, we estimate net
interest income expanded by 15.4% YoY, and 1% QoQ.
Sources: Companies, Maybank-IB
Brokerage and FX income down, mixed at treasury. Non-interest
income continued on a sequential quarterly decline for most banking
groups. Brokerage income declined for the 5th to 6th sequential quarter
– 1Q09’s brokerage income for major banking groups plunged 51-63%
YoY. FX income was also down for all banks. Treasury performance
was mixed – strong at BCHB, while Maybank was affected by higher
mark-to-market loss on securities and derivatives (interest rate swaps).
Fee-based income for all banks either expanded or was flat QoQ.
5 June 2009 Page 3 of 12
4. Banking
1Q09 Non-Interest Income
Non-Int Inc (RM YoY QoQ % Non-Int Inc / Op
m) inc
Maybank 630 1.9% -22.2% 25.2%
BCHB 915 14.6% 96.5% 36.9%
Public Bank 294 -47.2% -6.1% 21.0%
RHB Cap 213 -12.4% -19.3% 25.2%
AMMB 251 -3.6% -16.8% 29.5%
EON Cap 70 4.4% -9.1% 20.6%
Total 2,374 -6.7% 6.4% 28.2%
Sources: Companies, Maybank-IB
Loans growth at larger banks outpaced system growth. Domestic
loans growth continued at most banks, with stronger QoQ loans growth
at Maybank, CIMB Bank and Public Bank compared to the system
growth. Loans expansion was mainly in the consumer segment
(mortgage and autos), while loans to the SMEs were generally down,
reflecting poor business sentiment. Major YoY loans growth at the
group levels of Maybank and BCHB was aided by new subsidiaries: BII
(Sep 08), BankThai (Jan 09), and M&A: Niaga-Lippo (Nov 08).
1Q09 Gross Loans
Gross Loans at Vs. Mar ‘08 Vs. Dec ‘08
Mar ‘09 (RM m) (YoY) (QoQ)
Maybank 192,877 21.9% 1.8%
Maybank (domestic) 104,490 12.6% 2.1%
BCHB 134,810 33.4% 10.0%
CIMB Bank (domestic) 92,009 18.6% 3.0%
Public Bank 125,431 17.7% 4.2%
Public Bank (domestic) 98,780 2.3% 4.3%
RHB Cap 62,771 8.2% -0.6%
AMMB 58,769 6.9% 0.6%
EON Cap 31,027 6.5% 0.6%
System * 733,874 +10.9% +1.0%
* BNM Monthly Statistical Bulletin (Mar ‘09); Sources: Companies, Maybank-IB
Stress showing in some loans segments. Sequential loan loss
provisions (LLP) were lower at the smaller banks, while specific
provisionings (including pre-emptive provisioning) was stepped up.
NPLs crept up at the overseas operations: BII and the Singapore
operations for Maybank, and from the consolidation of BankThai at
BCHB. Domestic NPL saw upticks in the consumer (mortgage, autos)
and working capital segments. Net NPL ratios of all the banks
continued to trend down due to the expanded loans base.
1Q09 Loan Loss Provision, NPLs, Loan Loss Coverage
LLP YoY QoQ Net NPL @ LLC @
(RM m) Mar ’09 Mar ’09
Maybank 412 147.7% 32.0% 1.73% 101.1%
BCHB 272 43.7% 3.4% 2.62% 83.5%
Public Bank 156 8.3% 4.1% 0.83% 163.8%
RHB Cap 175 15.0% -17.1% 2.57% 84.9%
AMMB 123 224.8% -13.9% 2.56% 75.1%
EON Cap 36 -58.0% -44.2% 3.08% 72.1%
Total 1,173 51.5% 2.7% 2.24% * 88.3% *
* BNM Monthly Statistical Bulletin (Mar ‘08); Sources: Companies, Maybank-IB
5 June 2009 Page 4 of 12
5. Banking
Gross NPL
RM m Jun ‘07 Sep ‘07 Dec ‘07 Mar ‘08 Jun ‘08 Sep ’08 Dec ‘08 Mar ‘09
Maybank 8,258 8,082 8,010 7,648 6,472 6,909 6,827 6,863
BCHB 8,125 8,009 7,325 7,234 7,066 6,901 6,056 * 7,540
Public Bk 1,560 1,516 1,404 1,318 1,219 1,167 1,210 1,232
RHB Cap 3,998 3,589 3,165 3,183 3,009 2,897 2,840 3,105
AMMB 5,472 4,595 4,218 3,602 3,469 3,336 3,125 2,426
EON Cap 1,749 1,778 1,847 1,884 1,775 1,717 1,546 1,682
% loans
Maybank 5.60 5.35 5.16 4.83 3.78 3.61 3.60 3.56
BCHB 8.65 7.92 7.25 7.16 6.51 6.17 4.94 * 5.59
Public Bk 1.70 1.58 1.39 1.24 1.08 0.99 1.01 0.98
RHB Cap 6.99 6.21 5.57 5.49 5.07 4.63 4.50 4.95
AMMB 10.67 8.75 7.89 6.55 6.25 5.77 5.35 4.13
EON Cap 6.11 6.15 6.30 6.47 5.98 5.62 5.01 5.42
* Included consolidation of BankThai from 1Q09; Sources: Company, Maybank-IB
Loans Book
As at Mar ‘09 Maybank * BCHB Public RHB Cap AMMB
Gross Loans (RM m)
Residential properties 24,243 30,398 33,437 14,480 11,316
Non-residential properties 6,518 9,873 24,563 3,114 2,878
Transport vehicles 18,797 13,959 29,855 7,654 24,350
Purchase of securities 10,492 10,548 1,794 2,019 1,882
Personal use 3,529 4,183 7,644 1,990 2,324
Credit cards 3,571 2,988 994 2,106 1,844
Working capital 52,901 38,021 20,030 23,121 9,437
Others 9,327 25,020 7,314 8,287 5,642
Overseas 63,500
Total 192,877 134,989 125,631 62,771 58,769
Gross NPL (RM m)
Residential properties 2,020 1,726 499 1,135 924
Non-residential properties 344 449 110 163 221
Transport vehicles 153 407 183 241 454
Purchase of securities 183 78 3 49 67
Personal use 209 340 121 103 19
Credit cards 50 92 17 67 70
Working capital 2,286 2,711 283 1,129 450
Others 476 1,737 16 217 222
Overseas 1,143
Total 6,863 7,540 1,232 3,105 2,426
Gross NPL ratio (%)
Residential properties 8.33% 5.68% 1.49% 7.84% 8.17%
Non-residential properties 5.28% 4.55% 0.45% 5.23% 7.67%
Transport vehicles 0.81% 2.91% 0.61% 3.15% 1.86%
Purchase of securities 1.75% 0.74% 0.16% 2.41% 3.55%
Personal use 5.93% 8.12% 1.58% 5.19% 0.82%
Credit cards 1.39% 3.09% 1.73% 3.19% 3.81%
Working capital 4.32% 7.13% 1.41% 4.88% 4.77%
Others 5.10% 6.94% 0.22% 2.62% 3.93%
Overseas 1.80%
Total 3.56% 5.59% 0.98% 4.95% 4.13%
* Included consolidation of BankThai from 1Q09; Sources: Company, Maybank-IB
5 June 2009 Page 5 of 12
6. Banking
Banking Sector Summary (Quarterly)
(RM mil) Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09
PROFIT AND LOSS BALANCE SHEET
Operating income Gross loans
- Maybank 2,235 2,982 2,026 2,659 2,497 - Maybank 158,265 171,217 191,223 189,387 192,877
- BCHB 2,017 2,158 1,683 1,882 2,514 - BCHB 101,049 108,475 111,860 122,537 134,810
- Public Bank 1,576 1,363 1,370 1,431 1,398 - Public Bank 106,576 113,056 117,760 120,319 125,431
- RHB Cap 830 844 855 917 847 - RHB Cap 58,005 59,305 62,626 63,161 62,771
- AMMB 826 779 754 889 854 - AMMB 54,999 55,540 57,814 58,420 58,769
- EON Cap 341 367 320 397 340 - EON Cap 29,131 29,680 30,567 30,853 31,027
Pre-tax profit Deposits fr customers
- Maybank 1,020 1,019 882 960 654 - Maybank 185,202 187,112 204,946 206,593 211,724
- BCHB 749 947 572 448 839 - BCHB 131,602 136,842 141,954 153,425 167,394
- Public Bank 971 792 804 813 745 - Public Bank 144,500 152,174 155,818 162,280 168,133
- RHB Cap 310 362 489 262 315 - RHB Cap 79,379 75,051 75,624 73,962 76,450
- AMMB 309 274 326 345 273 - AMMB 55,769 47,085 48,930 50,668 64,132
- EON Cap 104 -99 89 109 107 - EON Cap 28,005 28,123 29,094 30,118 30,036
Net profit Total assets
- Maybank 759 703 572 735 503 - Maybank 258,876 269,101 304,398 301,706 308,769
- BCHB 535 650 448 319 614 - BCHB 206,736 190,907 195,475 206,745 226,918
- Public Bank 717 594 616 654 589 - Public Bank 178,099 185,236 190,730 196,163 199,227
- RHB Cap 222 271 358 197 229 - RHB Cap 109,668 104,355 104,708 104,533 103,469
- AMMB 217 203 230 248 180 - AMMB 83,192 83,067 82,876 86,540 89,893
- EON Cap 75 -79 65 89 80 - EON Cap 41,523 41,563 42,885 43,423 42,061
PROFITABILITY RATIOS
Net interest margin Cost-to-income
- Maybank 2.72 2.81 2.50 2.71 2.79 - Maybank 47.7 37.8 60.0 53.0 56.5
- BCHB 2.30 2.20 2.30 2.60 2.71 - BCHB 52.6 48.0 55.2 58.2 52.8
- Public Bank 2.42 2.42 2.45 2.42 2.33 - Public Bank 32.8 30.2 33.6 32.7 35.6
- RHB Cap 2.35 2.55 2.60 2.70 2.62 - RHB Cap 44.3 40.4 43.0 47.7 44.6
- AMMB 3.10 2.99 3.23 3.07 2.99 - AMMB 55.4 53.6 52.2 45.1 47.7
- EON Cap 2.82 2.82 2.79 3.14 2.64 - EON Cap 44.4 59.5 62.2 50.3 55.7
LIQUIDITY RATIOS
Net loans/customer dep Net loans/total deposit
- Maybank 81.9 88.1 89.9 88.4 87.8 - Maybank 73.4 78.4 77.5 77.4 76.6
- BCHB 76.5 75.4 75.1 76.5 76.9 - BCHB 73.1 69.9 69.7 73.1 71.8
- Public Bank 72.6 73.1 74.4 73.0 73.4 - Public Bank 68.2 69.9 71.0 70.5 70.5
- RHB Cap 70.1 75.8 79.5 81.9 78.7 - RHB Cap 63.3 68.3 72.3 73.3 73.2
- AMMB 94.3 112.6 113.1 110.5 88.8 - AMMB 83.6 83.9 86.1 82.6 81.0
- EON Cap 99.8 100.9 100.6 98.4 99.3 - EON Cap 80.7 81.6 81.3 80.9 82.3
CAPITAL RATIOS
Tier 1 core capital RWCR
- Maybank 9.9 10.4 9.5 8.1 8.3 - Maybank 14.0 14.1 13.2 13.5 12.1
- BCHB 9.7 9.7 9.5 10.9 10.9 - BCHB 14.4 14.4 14.2 14.1 13.3
- Public Bank 7.6 8.6 7.4 8.3 7.6 - Public Bank 12.2 14.3 13.2 13.7 13.3
- RHB Cap 8.2 8.6 7.8 8.7 9.4 - RHB Cap 12.3 12.6 11.7 12.6 13.3
- AMMB 8.2 8.7 9.1 9.4 9.7 - AMMB 13.5 14.3 14.1 14.3 15.2
- EON Cap 8.8 8.5 8.3 9.1 9.4 - EON Cap 12.3 12.0 12.0 12.5 11.9
ASSET QUALITY RATIOS
Net NPL Loan loss coverage
- Maybank 2.42 1.92 1.84 1.80 1.73 - Maybank 87.2 99.2 100.2 99.8 101.1
- BCHB 3.67 3.31 3.07 2.29 2.62 - BCHB 71.9 74.2 76.6 88.1 83.5
- Public Bank 1.10 0.93 0.87 0.86 0.83 - Public Bank 132.1 150.2 159.1 159.7 163.8
- RHB Cap 3.23 2.75 2.38 2.24 2.57 - RHB Cap 74.4 81.5 87.4 90.3 84.9
- AMMB 3.66 3.31 3.00 2.74 2.56 - AMMB 67.3 72.3 74.5 77.5 75.1
- EON Cap 4.00 3.08 2.92 2.51 3.08 - EON Cap 62.1 74.1 75.4 78.6 72.1
Sources: Companies, Maybank-IB
5 June 2009 Page 6 of 12
7. Banking
Forecasts and valuations
2-3% 2009 loan growth forecast retained. Loan disbursements,
applications and approvals in the system slowed in Apr 09, reflecting
cautious sentiment. YTD loans growth was slower at 1.4% (4M2008:
+3.4%), driven by household loans (+2.2%) while business loans’
growth was anemic (+0.4%). Household loan growth was mainly in the
residential property segment, aided by sales campaigns as developers
cleared inventories. We retain our 2-3% loan growth forecast for 2009.
Expect rising NPL momentum. 1Q09 GDP (-6.2% YoY, -7.7% QoQ)
should be the weakest, suggesting the worst may be over. We expect
the economy to recover from 2Q09, but the recovery will be slow, with a
return to 3Q08’s high only in 4Q10. The poor 1Q09 GDP suggests
growing stress in system loans. We expect sector NPLs to accelerate in
3Q09, based on the historical 3-6 month interval from GDP trough to
NPL peak. We retain our +50% NPL formation expectation for 2009,
implying a gross NPL ratio of 7.2% by end-2009 (end-2008: 4.8%).
Malaysian GDP: The Worst is Over?
RM b
We project sequential
140 10%
quarterly growth from 2Q09
130 5%
120 0%
110 (5%)
100 (10%)
2Q09E
3Q09E
4Q09E
1Q10E
2Q10E
3Q10E
4Q10E
1Q08
2Q08
3Q08
4Q08
1Q09
Real GDP (LHS) YoY gwth (RHS)
Sources: Bank Negara, Maybank-IB
GDP trough vs. NPL peak: 3-6 months interval
15% 90,000
NPL peak NPL peak
10% 80,000
70,000
5%
60,000
0%
GDP 50,000
GDP trough
trough?
-5%
40,000
NPL
-10% peak?
30,000
GDP trough
-15% 20,000
2Q09E
4Q09E
2Q10E
4Q10E
4Q97
2Q98
4Q98
2Q99
4Q99
2Q00
4Q00
2Q01
4Q01
2Q02
4Q02
2Q03
4Q03
2Q04
4Q04
2Q05
4Q05
2Q06
4Q06
2Q07
4Q07
2Q08
4Q08
RM m
Real GDP YoY Growth (LHS) Gross NPL (RHS)
Sources: Bank Negara, Maybank-IB
5 June 2009 Page 7 of 12
8. Banking
Pricey against regional peers on P/BV and ROE. The current
liquidity driven market has lifted valuations. Share prices of banking
stocks have recovered 18-50% from their year-lows even though
fundamentals remain weak. We continue to Underweight the sector.
Asian Banks (ex-Japan) : P/BV vs. ROE
Sources: Bloomberg (71 listed banks in Asia), Maybank-IB
Banking Sector – Regional Comparisons
Stock Currency Shr px PER (x) PER (x) P/B (x) P/B (x) ROAE (%)ROAE (%)
2009E 2010E 2009E 2010E 2009E 2010E
Malaysia
Maybank RM 5.50 15.4 16.0 1.4 1.4 8.8 8.5
BCHB RM 8.65 16.3 15.4 1.7 1.6 10.7 10.4
Public Bank RM 8.75 13.0 12.6 2.8 2.5 22.3 20.7
RHB Cap RM 4.18 10.6 9.9 1.1 1.0 10.5 10.4
AMMB RM 3.36 12.0 11.6 1.2 1.1 10.0 9.2
EON Cap RM 4.00 13.4 12.2 0.8 0.8 6.3 6.6
HL Bank RM 5.70 10.8 10.5 1.6 1.4 15.7 13.6
AFG RM 2.12 10.7 9.9 1.1 1.1 11.8 10.4
Affin RM 1.74 11.4 10.1 0.6 0.5 5.4 5.7
Average 13.7 13.3 1.4 1.3 11.3 10.6
Singapore
DBS SGD 12.60 18.3 15.3 1.2 1.2 6.7 7.7
UOB SGD 14.94 14.2 12.4 1.5 1.4 11.2 11.5
OCBC SGD 7.20 16.4 15.0 1.5 1.4 9.4 9.4
Average 16.3 14.2 1.4 1.3 9.1 9.5
China
ICBC HKD 4.83 12.4 10.8 2.2 2.0 18.3 19.1
CCB HKD 5.14 11.4 10.0 2.1 1.9 19.1 19.4
BOC HKD 3.46 11.6 10.0 1.6 1.4 13.6 14.9
BEA HKD 27.45 22.3 18.6 1.5 1.4 6.6 7.7
Hang Seng HKD 117.00 18.0 16.5 4.4 4.1 24.4 26.1
BoCom HKD 7.52 13.3 11.4 2.0 1.8 15.5 16.0
Average 14.8 12.9 2.3 2.1 16.2 17.2
Regional 14.9 13.5 1.7 1.6 12.2 12.5
Sources: Maybank-IB, Consensus (Bloomberg)
5 June 2009 Page 8 of 12
11. Banking
Banking Sector Summary (Yearly - continued)
FY07 FY08 FY09 FY10 FY11 FY07 FY08 FY09 FY10 FY11
CAPITAL RATIOS (x)
Tier 1 core capital RWCR
- Maybank 10.1 11.0 11.7 11.8 11.8 - Maybank 15.1 15.2 15.4 15.5 15.3
- BCHB 9.3 10.9 12.0 12.5 13.1 - BCHB 12.5 14.1 15.5 16.1 16.9
- Public Bank 9.1 8.3 8.3 8.7 8.9 - Public Bank 13.6 13.7 14.0 14.1 14.0
- RHB Cap 7.1 5.3 6.7 7.5 8.3 - RHB Cap 12.2 10.0 11.4 12.2 12.8
- AMMB 8.7 8.4 9.7 10.6 11.3 - AMMB 12.6 13.9 15.2 16.0 16.6
- EON Cap 9.22 9.1 9.4 9.6 9.5 - EON Cap 13.0 12.5 11.9 12.2 11.9
ASSET QUALITY RATIOS
Net NPL Loan loss coverage
- Maybank 3.02 1.92 2.32 2.92 3.04 - Maybank 80.3 99.2 86.7 79.1 78.0
- BCHB 3.87 2.29 3.38 3.75 3.93 - BCHB 69.3 88.1 74.2 73.3 72.5
- Public Bank 1.24 0.86 0.97 0.93 0.95 - Public Bank 119.5 159.7 138.9 136.3 134.5
- RHB Cap 3.43 2.24 3.33 4.14 4.34 - RHB Cap 71.4 90.3 77.0 71.7 70.7
- AMMB 6.22 3.66 2.56 4.85 5.33 - AMMB 56.6 67.3 75.1 62.4 64.3
- EON Cap 4.14 2.51 2.72 2.82 2.82 - EON Cap 58.1 78.6 78.1 77.7 77.7
RETURN RATIOS
ROAE ROAA
- Maybank 17.6 15.2 9.6 8.0 9.0 - Maybank 1.3 1.1 0.8 0.7 0.8
- BCHB 20.3 11.9 10.7 10.4 10.8 - BCHB 1.6 1.0 0.9 0.9 0.9
- Public Bank 23.1 27.3 22.3 20.7 21.2 - Public Bank 1.3 1.4 1.1 1.1 1.1
- RHB Cap 11.9 14.1 10.5 10.4 10.6 - RHB Cap 0.7 1.0 0.8 0.9 0.9
- AMMB -5.7 11.2 11.6 9.5 9.1 - AMMB -0.4 0.8 1.0 0.8 0.9
- EON Cap 7.0 4.2 6.3 6.6 6.8 - EON Cap 0.5 0.3 0.5 0.5 0.5
Note: Maybank FYE June, BCHB FYE Dec, Public Bank FYE Dec, AMMB FYE Mar, RHB Cap FYE Dec, EON Cap FYE Dec
Sources: Companies, Maybank-IB, Consensus estimates
5 June 2009 Page 11 of 12
12. Banking
Definition of Ratings
Maybank Investment Bank Research uses the following rating system:
BUY Total return is expected to be above 10% in the next 12 months
HOLD Total return is expected to be between -5% to 10% in the next 12 months
SELL Total return is expected to be below -5% in the next 12 months
Applicability of Ratings
The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are
only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not
carry investment ratings as we do not actively follow developments in these companies.
Some common terms abbreviated in this report (where they appear):
Adex = Advertising Expenditure FCF = Free Cashflow PE = Price Earnings
BV = Book Value FV = Fair Value PEG = PE Ratio To Growth
CAGR = Compounded Annual Growth Rate FY = Financial Year PER = PE Ratio
Capex = Capital Expenditure FYE = Financial Year End QoQ = Quarter-On-Quarter
CY = Calendar Year MoM = Month-On-Month ROA = Return On Asset
DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On Equity
DPS = Dividend Per Share NTA = Net Tangible Asset ROSF = Return On Shareholders’ Funds
EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted Average Cost Of Capital
EBITDA = EBIT, Depreciation And Amortisation P.A. = Per Annum YoY = Year-On-Year
EPS = Earnings Per Share PAT = Profit After Tax YTD = Year-To-Date
EV = Enterprise Value PBT = Profit Before Tax
Disclaimer
This report is for information purposes only and under no circumstances is it to be considered or intended as an offer to sell or a solicitation
of an offer to buy the securities referred to herein. Investors should note that income from such securities, if any, may fluctuate and that each
security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental
ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on
price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis. Accordingly, investors may
receive back less than originally invested. Past performance is not necessarily a guide to future performance. This report is not intended to
provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the
particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding
the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.
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Published / Printed by
Maybank Investment Bank Berhad (15938-H)
(Formerly known as Aseambankers Malaysia Berhad)
(A Participating Organisation of Bursa Malaysia Securities Berhad)
33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur
Tel: (603) 2059 1888; Fax: (603) 2078 4194
Stockbroking Business:
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5 June 2009 Page 12 of 12