Investment Highlights

• We maintain our BUY call on Malayan Banking (Maybank) with a revised fair value (FV) of RM10.10/share (previously: RM9.80/share) after adding a 3% premium to the share price with an assigned 4-star ESG rating (Exhibit 1). Our FV is based on FY22 ROE of 10.0% leading to a P/BV of 1.3x. No changes to our earnings estimates.

• Maybank unveiled its next 5-year business strategy (2021– 2025) known as M25 and provided a briefing to analysts.

• M25 focuses on 3 long-term outcomes: i) to attain sustainable ROE; ii) achieve top rated customer experience through digital and hybrid services; and iii) become a regional leader in ESG (Exhibit 2).

• By end-2025, the group aims to achieve an ROE of 13–15%, CI ratio of ≤ 45.0%, EPS of >100 sen/share and dividend payout ratio of 40–60%. We see these targets as achievable given that it has already reported a CI ratio of 45.4% in FY20. Also, over the last 4 years (FY16–19 prior to FY20 which saw earnings impacted by modification loss, steep rate cuts and proactive recognition of provisions) the average ROE was circa 11.0%.

• Supporting the long-term desired outcomes will be 3 group strategic priorities: i) pervasive digitalization; ii) new value drivers; and iii) sustainability (Exhibit 3).

• Under the pervasive digitalization priority, the group aims to evolve from just a financial services provider to a customer’s lifestyle partner with wraparound experiences built within Maybank’s services, products and platform. We see this as essential to build stickiness with customers before restrictions on digital banks’ assets expansion are eventually eased 3 to 5 years later when 5 new licences are awarded in early 2022.

• New profit drivers (NPD) have been identified to lift the group’s BAU ROE of 11.5% to its aspirational ROE target of 13–15% by 2025.

Source: AmInvest Research - 12 Apr 2021