Date: September 17, 2024
Broker: Maybank Investment Bank Berhad

Stock Performance Overview

• Share Price (MYR): 4.70
• Market Cap (MYR Million): 91,230
• Target Price (MYR): 5.40
• Upside Potential: 15%

Valuation Metrics

• PER (x) CY24E: 13.0
• PER (x) CY25E: 12.3
• P/B (x) CY24E: 1.6
• P/B (x) CY25E: 1.5
• ROAE (%) CY24E: 12.6
• ROAE (%) CY25E: 12.7
• Net Yield (%) CY24E: 4.5
• Net Yield (%) CY25E: 4.9

Sector Outlook

Public Bank, along with other Malaysian banks, is expected to benefit from improving system liquidity in the banking sector. The company’s net interest margins (NIMs) have already returned to pre-pandemic levels, positioning it as one of the least impacted banks in terms of NIM pressure. In contrast to many other banks, Public Bank has shown a strong recovery, with stable NIMs at 2.20%, reflecting resilience in its core operations.

NIM Trends

Public Bank’s NIMs have already reached their pre-pandemic levels, and its current NIM guidance for FY25E is expected to remain strong at 2.19%, higher than the pre-pandemic level of 2.15%. The stability in NIMs has made Public Bank one of the few banks in Malaysia whose earnings are less susceptible to negative NIM fluctuations.

Growth Potential and Earnings Revisions

If NIMs for Malaysian banks return to pre-pandemic levels, Public Bank would not see significant changes in its earnings, as its NIMs have already stabilized. As a result, no earnings upgrade is expected for FY25/26E. However, Public Bank remains a key player in the sector, with stable earnings growth projected over the next two years.

Dividend Yield

Public Bank’s projected dividend yields are solid, with a net yield of 4.5% for CY24E and 4.9% for CY25E. This makes it an attractive investment for dividend-seeking investors, especially in light of its stable financial performance.

Key Risks

Despite the positive outlook, Public Bank faces certain risks, including a potential slowdown in economic growth and intense competition within the banking sector. However, the bank’s strong fundamentals and resilient NIMs position it to weather these challenges effectively.