- We are maintaining our HOLD rating on Malayan Banking Bhd (Maybank), with an unchanged fair value of RM10.20/share. This is based on an ROE of 14.0% FY13F, which translates into a fair P/BV of 1.9x.

- Maybank has announced that the issue price for the new shares to be issued in relation to its 6th dividend reinvestment plan (DRP) had been fixed at RM8.80/share.

- Recall the 6th DRP plan is for its final dividend of FY12, which was announced in February 2013. To recap, the final dividend comprises:- (a) GDPS of RM0.18 less 25% tax (NDPS of RM0.135), and (b) single-tier dividend of RM0.15/share.

- The proposed gross dividend consists of a cash portion of RM0.04 single-tier dividend and an electable portion of RM0.29 (net RM0.245), whereby the electable portion comprises:- (a) RM0.11 single-tier dividend; (b) RM0.18 franked dividend (net RM0.135).

- Maybank said the issue price is based on the five-day volume weighted average market price (VWAMP) of RM9.61/share up to and including 11 April 2013.

- The issue price is fixed after adjusting for the following:- (i) a gross dividend adjustment of RM0.33 to the 5-day VWAMP (Ex-Dividend VWAMP); and (ii) a discount of RM0.48 which is approximately a 5.17% discount to the Ex-Dividend VWAMP of RM9.28.

- The book closure date pursuant to the Final Cash Dividend and the 6th DRP has been fixed for 29 April 2013.

- The new Maybank shares arising from the 6th DRP is targeted to be listed on the Main Market of Bursa Securities on 30 May 2013.

- The discount provided in this latest 6th DRP of 5.17% is slightly wider than the previous DRP plan of 4.65%. The price is within our expectations. Our forecast has been fine-tuned but our ROE is unchanged at 14.1% FY13F based on the price announced.

- The historical subscription rate ranged between 86% and 91% (see table in following page). Maybank’s final dividend was above expectations with a total dividend payout ratio of 77%. We expect the main driver to share price to still be high dividends. We are maintaining our dividend payout ratio at 55.9% for FY13F, given the relatively low bank entity’s common equity ratio at 7.6%.

Source: AmeSecurities