The group held an analyst briefing to discuss strategies to achieve its TWP24 targets. We maintain our medium-term optimism as we do not anticipate major overruns or overhauls in the near future. Key investment thesis remains to be its CET-1-led defensiveness. BUY with a TP of RM7.00 derived from a PBV of 0.91x (COE: 10.7%, TG: 3.0%, ROE: 10%) on our FY23E BVPS of RM7.66. The stock’s high capital ratios (CET-1: 17%) could allow to group to deliver more dividend surprises in spite of management’s existing guidance. Additionally, the group’s recent digital banking licence win could serve as a sentiment booster to the group as it nears the launch of its new entity and digital offerings.

The group identified strong opportunities in its wealth management segment where it opines it could at least double its AUM by 2024 and tap into a larger affluent customer base, given highly encouraging current take-ups. Meanwhile, the group intends to capture a larger SME market share to 12% (from 9% currently) with secure lending being a leading proposition with value-added digital solutions and hyper personalisation to instil customer stickiness. ESG-enablement solutions would also provide borrowers a better leg into more sustainable practices.

Capitalising on its Singapore operation, a more diverse regional hub could be established to boost its commercial and SME lending in the ASEAN region. That said, Cambodia looks to be a new focus area where the group strives to gain 20% annual loans growth in the next three years. Backed by its growth potential, earnings expansion of 10% per year from Cambodia and Singapore combined may not be too farfetched (albeit, total international businesses make up less than 5% of group earnings at this juncture).

The group seeks to allocate up to RM500m over the next three years into modernising its operations, with several key automation prospects being identified to improve customer experience and productivity.

Source: Rakuten Research - 5 Aug 2022