Maybank is the first FI to introduce the RTO scheme called HouzKey under Maybank Islamic, leveraging on the Ijarah Muntahia Bittamleek (IMBT) concept. To qualify for the scheme, buyers have to comply with the RM5k/month minimum salary. For now, the properties are listed in the Klang Valley and will be extended outside Klang Valley in the near term. The scheme caters to both primary and secondary market and for a start, Maybank has allocated RM1bn budget for this scheme. No change to our forecasts, and GGM-derived TP of RM10.00, (COE 11.3% and WACC of 8.8%). Maintain HOLD rating.

Pilot test. In contrast to the others mortgage schemes in place, HouzKey was set up as an alternative route for homeownership via RTO (rent-to-own) that only requires 3 months of rental deposits and homebuyers can move into the home immediately and given the option to purchase the house after a minimum of one year of renting at a pre-determined price. Maybank is the first financial institution introduces the scheme besides the property developers.

Targeting the M40 segment. The minimum salary to qualify under the scheme is RM5k/monthly (single and joint income). Thus we believe the pricing is targeting at the M40 segment. We are of the view that the HouzKey scheme is to cater for younger and to those with higher disposable income.

Support by authorities. The scheme is well supported by BNM in view of the various issues concerning housing affordability. In addition, the scheme was part of Maybank’s initiative on environmental, social and governance (ESG) and part of BNM’s effort towards “Value-Based Intermediaries – Beyond Profit objective”.

Financial impact. Maybank allocated the similar risk-weighted asset (RWA) for HouzKey scheme. The RWA is higher once borrowers do not exercise their option to buy as the house will be parked under Maybank’s inventory until it finds a new potential buyer for the property. This translates into a similar average asset yield compared to the traditional mortgages yield.

Fair reception. Out of the RM1bn allocation for the scheme, Maybank indicated it has not fully utilised the allocation due to higher rejection rates. The reason for higher rejection rates is due to tighter credit control as the scheme carries higher credit and market risk to Maybank.

No dropout seen. Approaching 1 year since it was launched, no dropout was seen for the scheme, indicating its tighter credit control. For now, the properties are only listed in the Klang Valley and the scheme is extended to the secondary market. Interestingly, for the secondary market, the property will not sit in Maybank’s inventory until the potential buyer is interested to buy the property.

Forecast. We Leave Our Forecasts Unchanged.

Maintain HOLD, TP: RM10.00. Maybank is due to release 3Q18 result at the end of Nov-18. We believe the uncertainties in the business segment and the end of tax holiday will normalise the loan growth. Given this, we believe Maybank will deliver another set of soft results given its balanced book between household and non household. We maintain our HOLD rating on Maybank with unchanged TP of RM10.00 based on GGM of (i) COE 11.3% and (ii) WACC of 8.8%).

Source: Hong Leong Investment Bank Research - 22 Oct 2018