Despite indications of softer domestic corporate lending activities thus far this year, which suggests the upcoming 1Q13 result is likely to be muted, we believe this has already been built-in at current share price levels. That said, management expects corporate lending activities to pick up ahead while credit cost and overheads are areas that may yield positive surprises. Fair value of RM10.40 and Buy call maintained.

-  Muted 1Q13 but no change to targets. Maybank has seen some softness in domestic corporate lending activities thus far this year. Management believes this is due to corporates adopting a wait-and-see attitude leading up to the general election and thus, expects a pickup ahead once the election overhang clears. Retail lending, however, has generally held up better. For now, Maybank is sticking with its 2013 targets. We believe investors are already expecting a muted 1Q13, given seasonal trends as well as data releases from BNM, which have already shown softer business loan growth numbers.

-  Capital levels comfortable to support organic growth. As at end-2012, fully-loaded CET-1 ratios for the group and bank were 10% and 
8.2% respectively, assuming a reinvestment rate of 85% for the 2012 final dividend. Management is comfortable with its capital levels, which should be sufficient to support the group’s organic growth as well as the planned capital injections of USD100m for the Philippines and USD150m for the Indonesian operations later this year.

-  High payouts to continue. While Maybank’s 40-60% dividend policy is unchanged, actual payout will continue to trend above the policy range as long as the DRP is in place and the take-up rate is still good. Since FY06/10, Maybank’s dividend payout has been in excess of 70%, helped by the DRP and take up rates of 86%-91%. We understand that there are no plans to discontinue the DRP at this juncture.

-  Foreign shareholding. Maybank’s latest foreign shareholding stood at 24.3%, up from 14% a year ago. We note that this has surpassed the previous peak of around 22.8% in Apr 2007. With the significant rise in the foreign shareholding level, we think it would be interesting to see if Maybank is able to maintain its take up levels for its DRP.

Source: RHB