Maybank IB Views

Monday, March 28, 2011

Public Bank RM13.04: Hold
Consumer lending still resilient...for now

Momentum sustained. The key takeaway from a recent Public Bank visit is that lending momentum remains very much intact on the consumer front, but that rate competition for both loans and deposits is unlikely to ease anytime soon. Our earnings forecasts are broadly maintained. While we like the stock for its solid fundamentals, much is reflected in the current share price (prospective 2011 P/BV of 3x, ROE: 23.9%) we believe, and we see little catalyst in the near term. Hold maintained with an unchanged DDM-derived TP of RM14.10 (payout ratio: 52%, cost of equity: 10.6%, terminal growth rate: 5%).

CPI, Feb 2011
Inflation rate heads further up...

Inflation rate in Feb '11 was a higher-than-expected and a 22-month high of +2.9% YoY (Jan '11: +2.4% YoY; Maybank-IB: +2.5% YoY; Consensus: +2.7% YoY). Sequentially, consumer prices increased by +0.5% MoM (Jan '11: +0.6% YoY; Dec '10: + 0.4%). "Food and Non-Alcoholic Beverages" (FNAB) and "Transport" accounted for 72.7% of the YoY increase. Meanwhile, "core" inflation rate which excludes FNAB prices and Transport costs picked up by +1.5% YoY (Jan '11: +1.2% YoY), led by higher prices of services, notably "Restaurants & Hotels", "Health" and "Education". We have revised our headline 2011 inflation rate forecast to +3% from +2.5% last week.

The FBM KLCI rose 11.66-points and closed at 1,515.55 last Friday. The local market rose despite Japan’s nuclear woes at its reactor plants, Middle East tensions in Libya and Yemen as well as Portugal’s debt woes.The obvious support areas for the FBM KLCI are located in the 1,474 to 1,515-zone. The very firm resistance zone of 1,518 and 1,576 will see heavy liquidation activities.

Other Local News
AMMB-RHBCap: Merger may be back on the table. A proposal to merge AMMB Holdings Bhd and RHB Capital Bhd, which first surfaced in 2007, is back on the table. (Source: The Edge Financial Weekly)

MISC: Eyeing IHC Merwede. International shipping publications are speculating that national carrier MISC Bhd could be a potential investor in Holland’s IHC Merwede Holding BV. (Source: The Edge Financial Weekly)

MAS: Firefly banking on Iskandar to develop southern hub. FlyFirefly, a unit of Malaysia Airline System Bhd (MAS) will develop the Sultan Ismail International Airport as its southern hub in tandem with developments taking place at Iskandar Malaysia, the southern economic development corridor in Johor. (Source: The Edge Financial Daily)

Pos Malaysia: Declares 17.5 sen dividend, MPC joins bid. Pos Malaysia Bhd has recommended a first & final and special dividend totalling 17.5 sen per ordinary share less 25% tax in respect of the financial year ended Dec 31, 2010. Separately, Malaysian Pacific Corp Bhd and Amanah Raya Bhd are believed to have submitted a joint bid for the 32.2% equity stake in Pos Malaysia Bhd held by Khazanah Nasional Bhd. (Source: Bursa Malaysia, The Edge Financial Daily)

Mamee: To upgrade facilities. Mamee-Double Decker (M) Bhd, which aims to achieve an annual revenue of RM1b in five years, will spend 90% of its RM100m capital expenditure (capex) this year to upgrade its facilities and machinery in one of its Malacca plants. (Source: The Star)

SC: Zarinah’s term extended. The Securities Commission (SC) said the tenure of its chairman Tan Sri Zarinah Anwar has been extended for one year with effect from April 1. (Source: The Star)

Iskandar: 2012 to be tipping point for Iskandar. The first phase of catalyst projects in the ambitious Iskandar Malaysia will begin operations next year, signaling the beginning of a strong and sustainable metropolis of international standing. (Source: The Star)


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