• HLIB institutional Research maintains BUY on RHBBANK with a TP of RM5.29 (+13% upside). Currently, the stock is trading at undemanding valuation of 8.2x FY17 P/E (20% lower than its peers 10.3x) and 0.87x P/B (26% discount against its peers’ 1.17x), respectively, supported by 2016-2018 earnings CAGR of 16%. We see limited downside risks for the stock as current low valuations reflect the concerns over its asset quality and would see a stronger rerating as asset quality concerns to taper off in the mid to long term, given management guidance that asset quality issue has peaked and could improve in coming quarters.
   
• Imminent breakout. RHBBANK’s prices were gyrating within the RM4.55-4.87 range for the past two months. Both daily MACD and RSI readings are largely neutral while daily slow stochastic indicator is hooking up strongly. This, coupled with early signs of bottoming up in weekly indicators’ readings suggests prices are heading towards a breakout soon.
   
• Immediate resistance is the downtrend line near RM4.75. A decisive break above RM4.75 will lift prices higher towards RM4.87 and RM5.06 before advancing further towards our LT objective at RM5.18. Conversely, key supports are RM4.58 (21 Nov low) and RM4.50 (weekly lower Bollinger band). Cut loss below RM4.48.

Source: Hong Leong Investment Bank Research - 25 Nov 2016