Journey to Wealth
Malayan Banking Bhd - Exploring opportunities in Thailand?
News According to media reports, Malayan Banking Bhd ('Maybank') is exploring a bank business opportunity in Thailand. It was reported that the group has emerged as one of the potential buyers of a 33% stake in Bank of Ayudhya.
Recall in April 2012, media had also reported that the group is in talks about acquiring a stake in TMB bank PCL.
Comments We view Maybank plan to possibly venture into the Thailand banking business positively. Its move to search for business opportunities in Thailand is within expectation as its strong proforma Core Capital Ratio ('CCR') post Dividend Reinvestment Plan ('DRP') of 10.2% positions the group well to make an acquisition.
The 33% stake in Bank of Ayudhya is from General Electric Co.
Meanwhile, Bank of Ayudhya has a reasonable balance sheet with NPL ratio of 4.1% and coverage ratio at 106% respectively (vs. the industry's 4.1% and 117% respectively).
Currently, Bank of Ayudhya is trading at 1.8x BV (industry: 1.92x) against its low ROE of 13.7% (vs. the industry's 16.8%).
Outlook A pro-forma Core Capital Ratio of 10.2% should see Maybank well positioned to meet the 1 January 2013 Basel 3 minimum requirement of 7%.
The Kim Eng acquisition has enabled the group to get solid and steady fee-based incomes from the Asean region, including Thailand. A commercial banking platform will further strengthen its presence in Thailand.
At home, the group earnings upside could come from a lower credit charged-off rate going forward as well as stronger than expected feebased incomes after the acquisition of Kim Eng. The stock offers a good dividend yield of 6.3%.
Forecast No earnings impact.
Rating Maintain OUTPERFORM
Our OUTPERFORM rating is maintained as the current share price implies a 21% total upside (together with a 5.0% net div. yield) to our Target Price (TP).
Valuation TP unchanged at RM10.40 based on 2.0x FY13 P/BV, implying 14.9 FY13 PER.
Risks Unexpected slowdown in fee incomes.
Source: Kenanga
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