Sep 11, 2011

Malaysia Banking Sector stocks BUY Call by MIDF

Call on sector
We remain positive on the banking sector as the banks overall have continued to record good net profits for the quarter. Although not sparred by the external headwinds, we expect banks earnings to remain healthy underpinned by loan growth supported by projects under the Economic Transformation Programme (ETP), low
credit charge offs and an improved operating efficiencies via streamlining structures at banking groups. 

Our BUY calls are Maybank (TP: RM10.50), AMMB (TP: RM7.30) and CIMB (TP: RM9.00).
Maybank: The stocks trades at 1.95x P/BV to our forecast BV for FY12 which is still lower than its historical P/BV of 2.35x. Improving profit contribution from BII and asset quality of both domestic and overseas operations. Beneficiary of the key financing deals from the ETP projects. Leveraging on the platform of Kim Eng Securities to penetrate newer markets in the region and for investment banking deals. 

AMMB: Group’s effort to rebalance its loan portfolio to increase the composition mix of business/corporate loan portfolio to generate a higher growth in non-interest income and the support and knowledge enhancement from its key strategic partners have been positive thus far in generating stronger earnings. Impaired loan ratio has continued to trend downwards. 

CIMB:  Strong pipeline for IB deals and also on the ability to capitalize on ETP projects for financing. The strategic partnership and JVs established with other banks in newer markets as in Sri Lanka and India will be positive for cross border IB deals and financing. 

by MIDF 09 Sep 2011