• We keep our HOLD recommendation on Public Bank (PBB). Our fair value is unchanged at RM17.70/share, pegging the stock to FY21 P/BV of 1.4x, supported by an ROE of 10.7%.
• The group has announced a proposal to issue 4 bonus shares for every 1 existing PBB share held by the entitled shareholders (bonus issue). The entitlement date is yet to be determined.
• Upon the targeted completion of the proposed bonus issue by 1Q2021, PBB’s number of shares will be enlarged to 19,410.7mil from 3,882.1mil.
• There will not be any capitalization of reserves for the issuance of the bonus shares.
• The total share capital of PBB will remain unchanged at RM9.4bil. Hence, our projected FY21 ROE stays at 10.7%.
• This exercise will enhance the liquidity of PBB shares but will not change the fundamentals of the stock.
• With our fair value of the stock at RM17.70/share, the theoretical adjusted fair value after the completion of the proposed bonus issue will be RM3.54/share

Source: AmInvest Research - 9 Dec 2020