Although RHBBANK is likely to witness temporary share price overhang following media reports that Aabar Investments PJS (a passive investor) is planning to pare down its remaining 9.99% stake (400.52m shares) at ~RM5.64/share. HLIB maintains a BUY rating on the stock with RM6.50 TP (+16% upside), underpinned by better asset quality, strong CET1 ratio 15.5% vs sector’s 13.7%, undemanding valuations at 9.1x FY20 P/E (28% lower than peers) and 0.92x P/B (25% discount to peers), attractive FY20 dividend yield of 3.9% (16% higher than its peers). Technically, the stock is poised for a downtrend reversal to retest RM5.74-6.10 levels following the long-legged Doji pattern and bottoming up indicators.

Passive investor paring down stakes. Aabar Investments PJS (a passive investor) is planning to pare down its remaining 9.99% stake (400.52m shares) at ~RM5.64/share and any price weakness represents accumulation opportunity as the risk-reward profile is still skewed to the upside

HLIB maintains a BUY rating on the stock with RM6.50 TP (+16% upside), underpinned by better asset quality, strong CET1 ratio 15.5% vs sector’s 13.7% (which allows room to divvy even more), undemanding valuations at 9.1x FY20 P/E (28% lower than peers) and 0.92x P/B (25% discount to peers), attractive FY20 dividend yield of 3.9% (16% higher than its peers) and improving liquidity and free float post 100% Aabar’s exit.

Potential downtrend reversal. We believe RHBBANK’s share prices appear to be at the tail end of its short term downward consolidation, following the formation of long legged Doji candlestick and upticks in indicators. A decisive close above immediate resistance at RM5.74 (30D SMA) will spur prices higher to RM5.88 (upper Bollinger band) before reaching our LT objective at RM6.10 (upper channel). Supports are situated at RM5.50 (support trend line) and RM5.38 (200D SMA). Cut loss at RM5.37.

Source: Hong Leong Investment Bank Research - 19 Jun 2019