PUBLIC Bank Bhd’s stock price which is in the high double-digit range is very likely to be out-of-bound to many retail investors.
But with the bank doling out a 4-for-1 bonus issue – for the first time in a long time – the share price of Public Bank is poised to go below RM4 which would appeal to small time investors while further enhancing liquidity on a stock that is already very liquid.
“Based on the bank’s last closing price of RM18.46, the theoretical ex-price would be RM3.69,” deduced Maybank IB Research analyst Desmond Ch’ng.
“It has been a long while that Public Bank has paid out a bonus issue and none have been as large in quantum.”
Yesterday, Public Bank proposed a 4-for-1 bonus issue which entails the issuance of up to 15.5 billion new shares, thus raising its share capital base to 19.4 billion shares. The exercise is due for completion by 1Q 2021.
The last time Public Bank did a bonus issue was through a series of successive issuances in 2001 (3-for-10), 2002 (1-for-4) and 2003 (1-for-4).
In Ch’ng’s assessment, Public Bank’s fundamentals remain impeccable with an exceptional loan loss coverage of 362%.
“The management nevertheless remains cautious and had recently raised its FY2020 credit cost guidance to 30-35 basis points (bps) from 20-25bps previously,” he pointed out.
“Its capital position is a comfortable 13.6% at the group level, though slightly lower at the bank level of 12.4%. Our assumed dividend pay-out ratio of 50% translates to a dividend yield of 3.3% for FY2020.”
All-in, Maybank IB Research maintain its “hold” rating on Public Bank with a target price of RM18.80.
At 12.16pm, Public Bank was up RM1.48 or 8.02% at RM19.94, thus valuing the bank at RM77.41 bil. – Dec 9, 2020
