MAYBANK - Grossly Oversold And Ripe For A Technical Rebound

MALAYAN BANKING BHD Stock Code 1155

HLIB Institutional Research has a BUY rating on MAYBANK with target price of RM10.27, or 24.2% upside. MAYBANK remains our top proxy pick for banking sector as it offers resilient growth prospects (FY14-17 core earnings CAGR of 5%) at decent valuations of 11.2x and 10.2x FY16-17 P/E (vs. 10-year average 11.6x). Moreover, dividend yield is attractive at 6.8% for FY16, which is 139% higher than its average peers’ 2.8%. We believe such valuations have provided a sufficient margin of safety and cushion further sharp share price decline, supported by grossly oversold daily indicators.

Grossly oversold. From YTD high of RM9.45 on 24 Apr, MAYBANK’s share prices tumbled 13.4% to a low of RM8.18 on 18 Aug before closing at RM8.27 yesterday, in tandem with the broader market consolidation amid external and internal headwinds.

Momentum should pick up once MAYBAK’s s hare price is able to reclaim above the lower uptrend channel near RM8.48 (also 23.8% FR). A decisive breakout above RM8.48 bodes well for the stock to advance higher to more formidable resistances at RM8.66 (38.2% FR) and our long term objective of RM8.87 (200- d SMA). Cut loss at RM7.93 (3 sen below 17 Dec low of RM7.96).

Source: Hong Leong Investment Bank Research 03/10/2015