MALAYAN Banking Bhd (Maybank) is slowly but surely regaining investors’ interest once again in line with the recovery theme play and not forgetting its sturdy dividend payout amid the low interest rate environment.
Despite its FY2020 net profit edged down 21% to RM6.48 bil (FY2019: RM8.2 bil) in view of the bank having to book a significantly higher net impairment losses owing to the continued impact from the COVID-19 pandemic, not many investors would have expected it to propose a final dividend of 38.5 sen (4Q 2019: 39 sen) (ex-date to be determined later).
This brings its full-year dividend per share (DPS) payout to 52 sen (FY2019: 64 sen) – circa 7% yield – which according to Hong Leong Investment Bank (HLIB) Research, beat its FY2020 forecast of 28.4 sen while the consensus estimate was 35.8 sen.
Moving forward, the research house expects net interest margin (NIM) pressure returning (but will be short-lived) given the potential of 25 basis points overnight policy rate (OPR) cut in 1H 2021.
“On the other hand, loans growth is anticipated to stay tepid for now as COVID-19 related headwinds drag near-term showing but should gain back traction six to 12 months down the road,” projected analyst Chan Jit Hoong in a results review.
“We expect GIL (gross impaired loan) to creep upwards but would not be overly concerned as Maybank already made heavy pre-emptive provisioning in FY 2020.”
Moreover, Chan reckons that Maybank’s credit risk has been passably priced in by the market, judging from the high NCC (net credit cost) assumption applied for FY 2021 by HLIB Research and consensus.
“Also, we believe the Government and Bank Negara Malaysia (BNM) will stay supportive in helping troubled borrowers, thus limiting a significant sag in GIL ratio,” noted the research house.
All-in, HLIB Research maintained its “buy” rating on Maybank but with a lower Gordon growth model (GGM)-based target price of RM9.20 (from RM9.45 previously).
“In our opinion, the stock’s risk-reward profile is still skewed to the upside, premised on it being: (i) a prime candidate for rotational recovery play among FBM KLCI constituents and (ii) less susceptible to foreign equity sell-off,” added HLIB Research.
At 11.10am, Maybank was up 4 sen or 0.49% to RM8.13 with a turnover of 3.11 million shares, thus valuing the company at RM92.8 bil. – Feb 26, 2021
