In our view, the conclusion of the general election yesterday should: 1) Remove the political risk overhang, leading to lower risk premiums; 2) Lead to investments picking up pace again; and 3) Ease concerns of cancellations/delays in the rollout of ETP projects. We raised our fair value to MYR10.95 from MYR10.40 to reflect lower risk premiums. Buy recommendation maintained.  

♦  General election uncertainties removed, finally. Yesterday’s general election resulted in the Barisan Nasional coalition retaining control of the government. We think this eases the risks of cancellations and changes to the terms of big-ticket projects, and will help remove the uncertainties that may have impacted investment spending decisions by businesses. As seen from the recent banking statistics, business loan growth has slowed down to +8.7% y-o-y in Feb ’13 from +14.4% y-o-y in Jul’ 12 as businesses (and especially GLCs) adopted a “wait-and-see” stance (household loan growth stable at 11.5-12.5% y-o-y during this period). With the overhang removed, we expect loan demand from the business segment to pick up and this would be positive for the banks.

♦  Banking stocks poised to play catch-up. Malaysian banking stocks have lagged regional peers in terms of share price performance, up 3.7% YTD (weighted average). This is in contrast to regional banking stocks. Indonesia banks have been the best performer YTD with the big cap banks up an average 23% while the large Thai banks and Singapore banks are up 14.5-15.5% YTD. We believe the subdued performances of local banking stocks have largely been due to uncertainties arising from the general election as fundamentally, we see no change to the sector’s prospects. With the political overhang now removed, this should lead to lower risk premiums. The combination of these two factors means that Malaysian banks are poised to play catch-up to its regional peers, in our 
view.  

♦  Forecasts. We tweaked down our FY13-14 EPS projections by 1.5-2.5% to factor in the potential dilution from the new DRP shares.

♦  Investment case. To reflect lower risk premiums, we raised our benchmark CY13 PER to 15x from 14x, which results in a revised fair 
value of MYR10.95 (MYR10.40 previously). We see Maybank as an excellent proxy to ETP activities and would benefit from the pick-up in business lending activities. Maintain Buy call.

Source: RHB