Under Maybank's Enterprise Transformation Services programme, Maybank aims to be an "Islamic Inspired" Group. This enables Maybank  Islamic to reap the benefits of the group's distribution channels, IT systems and back-office operations. This also means that Maybank Islamic is able to leverage on the three pillars under the new Maybank Group namely Community Financial Services, Global Wholesale Banking and Insurance & Takaful.

The group has started to reap the fruits from its transformation programme above, resulting in the group gaining market shares in financing locally. Maybank Islamic's local financing growth of 18.3% YoY represented a 26.2% market share as at 31 Dec 2012. It has also improved on its key ratios. Its cost to income ratio now stands at 30% thanks to its ability to leverage on the Maybank Group's platform. Islamic Financing contributed 30.6% to the group's domestic loans in FY12, higher than FY11's 28.5%. Its gross impaired financing ratio improved to 0.85% from 1.62% a year ago. As such, its FY12 PBT of RM1.19b grew strongly by a CAGR of 50% between 2008 and 2012 and has surpassed the RM1.0b mark for the first time.

In the medium and long terms, its unique positioning in the Islamic banking areas should also enable Maybank Islamic to deliver a faster loan growth than other conventional banks as it captures the growth opportunities arising from Malaysia's ongoing development of Islamic banking in the next decade. The Malaysian government has set a target of 40% of the total domestic financing by 2020 to come from Islamic loans from the existing 29%. We believe that Maybank Islamic's unique footprint translates into a competitive edge in positioning it for a stronger growth ahead. Islamic financing has grown at a CAGR of 20% since 2005. Maybank Islamic's balance sheet expanded at a faster pace with its financing growing at a CAGR of 25% for 2007-2012 and its deposits growing 35% during the same period.

Given its continuing good prospects, we are maintaining our rating on MAYBANK as an OUTPERFORM.Management reckons that the group's outlook remained positive and that it would focus on: 1) extracting value from its regional platform to create top line synergies, 2) improving staff productivity and 3) changing the group's cost structure to improve efficiency. Our OUTPERFORM rating is maintained as the current share price implies a 28% total upside (together with a 6.4% net div. yield) to our Target Price of RM10.90, which is based on an unchanged 2.0x FY13 P/BV and implied a 14.5x FY13 PER.

Source: Kenanga