KUALA LUMPUR (July 26): CGS-CIMB has reiterated its "add" call on Malayan Banking Bhd (Maybank) at RM8.92 ,with an unchanged target price (TP) of RM10.30, as it sees the bank’s group global banking (GGB) division driving overseas businesses, expand transaction income, and enhance cross-selling capabilities.

Additionally, the research house maintained its financial year ending Dec 31, 2023 (FY2023)-FY2025 earning per share (EPS) forecasts and dividend-discount-model-based TP of RM10.30 for Maybank, as well as cost of equity of 10%, a terminal growth rate of 4%, and a growth rate of 4.5% forecast for the 15-year interim growth phase.

On Monday (July 24), Maybank hosted an investor day for its GGB division, a major contributor to the group, accounting for 37% of group revenue and 47.3% of pre-provisioning operating profit (PPOP) in FY2022.

GGB recorded a four-year revenue compound annual growth rate (CAGR) of 2.3% in FY2018 to FY2022, partly dragged down by the negative impact of the Covid-19 outbreak that caused revenue to dwindle by 5.5% in FY2021.

Meanwhile, PPOP grew at a four-year CAGR of 3.4% in FY2018 to FY2022.

“Going forward, we expect GGB’s PPOP to increase by 3% to 5% per annum over the next three to five years. We do not expect any significant pickup in the growth of GGB’s PPOP and revenue in the medium term, given its large revenue and PPOP base, and keen competition in the region,” commented CGS-CIMB analyst Winson Ng.

Ng further anticipated the top line growth of GGB to be at single-digit rates per annum over the next few years. Any stronger expansion in PPOP (relative to revenue growth) would originate from improvements in operating efficiency, partly through the sharing of resources among its operations in various countries.

CGS-CIMB’s reiteration of its "add" call is premised on the potential rerating catalysts from a turnaround in core EPS growth to 16% in FY2023, and potential write-back in management overlays of a total of RM1.7 billion as at end-March this year.

However, Ng noted that potential downside risks could come from a deterioration in asset quality and protracted deposit competition, though the stock is supported by an attractive dividend yield of 5.5% forecast for FY2023.

As at the time of writing on Wednesday, Maybank shares were up three sen or 0.33% to RM9 a share, valuing the banking group at RM108.61 billion.