Wednesday, February 1, 2012

Public Bank: Overweight: Continued To Deliver

31 January 2012
Price Target: RM13.90
Share price: RM13.52


Results
4Q11 net profit of RM877m (-2.4% qoq; +3.6% yoy) took FY11 net profit to RM3,483.8m (+14.3% yoy) which was in line with our (103.9%) and street (101.5%) forecasts.

Deviations
Largely in line.

Dividends
2nd interim of 28 sen single tier dividend. Ex and payment dates are 15 and 27 Feb. Total net dividend and payout ratio of 48 sen and 48.3% is in line with our projection of 48.8 sen and company’s policy of circa 50% (unchanged).

Highlights
# FY11 loans growth of 13.5% yoy driven by HP, mortgage and SME but slightly behind target of 14-15% as well as our assumption of 14%. The drag mainly came from overseas
operations (only 7%) while domestic growth was 14.1%.

# Besides loans growth, earnings expansion in FY11 was due to decent non-interest income growth, contained rise in overheads and lower provisions.

# For FY12, it is targeting 12-13% loans and deposits growth (vs. HLIB’s projection of 11%) that is expected to more than offset the anticipated 10-15bps erosion in NIM.

# Asset quality continued to improve and remained stable. Guidance is for both asset quality and credit charge to stay stable with boost from full adoption of FRS139.

# It is able to meet Basel III requirements ahead of time while existing capitals were grandfathered. Upon further clarifications, it strives to continue maintain a lean capital structure. BNM’s concept paper on counter-cyclical capital buffer is expected by 2014.

Risks
Unexpected jump in impaired loans and lower than expected loan growth.

Forecasts
FY12-13 forecasts raised by 1.4-1.9% following final results while we introduced FY14 forecast.

Rating- HOLD
Positives
- Above industry asset quality and ROE with potential boost from full adoption of FRS139;
- Excellent track record in delivering guidance and consistency in growth.

Negatives
- Dividend payout lower than previous years and uncertainty about quantum of counter cyclical buffer.

Valuation
RM13.90 (vs. RM13.45) post final results fine-tuning, based on Gordon Growth with ROE of 24.3% and WACC of 9.6%.



Source: HLIB Research

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