Journey to Wealth
Malayan Banking - DRP price fixed at RM8.00 BUY
- Malayan Banking (Maybank) has announced that in relationto its proposed final GDPS of RM0.36 for FP11 and the related dividendreinvestment plan (DRP), the issue price for the new shares under the DRP hasnow been fixed at RM8.00/share.
- Recall that the final GDPS of RM0.36 comprises anelectable portion of RM0.32 GDPS (net DPS basis is RM0.24) which can be electedto be reinvested in new ordinary shares in accordance with Maybank's DRP.
- The remaining portion of GDPS of RM0.04 (RM0.03 net oftaxation) will be paid in cash.
- Maybank said the issue price is based on the five (5)-dayvolume weighted average market price (VWAMP) of RM8.85 per Maybank share up toand including 16 April 2012, being the last trading day prior to the pricefixing date for the issue price of new Maybank shares.
- Thereafter, the 5-day VVAMP price of RM8.85 is adjusted bythe gross DPS of RM0.36, which leads to RM8.49 (taking RM8.85 less RM0.36).
- Subsequent to this, a discount of RM0.49 or approximately5.77% is applied to the exdividend VWAMP price of RM8.49.
- The DRP price is slightly higher than our estimated RM7.70reflected in our earnings model currently, but the impact is minimal.
- Thus, we consider the DRP price to be in line withexpectations.
- We maintain Buy on Maybank with a fair value ofRM9.80/share. We believe the key rerating catalysts are:- (a) improvement inasset quality, which will provide comfort that an up-cycle in loan lossprovisioning will likely be short-lived; (b) better-than-expected ROE; (c)betterthan-expected dividend.
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