Date: September 17, 2024
Broker: Maybank Investment Bank Berhad
Stock Performance Overview
- Share Price (MYR): 21.20
- Market Cap (MYR Million): 45,956
- Target Price (MYR): 24.30
- Upside Potential: 15%
Valuation Metrics
- PER (x) CY24E: 9.9
- PER (x) CY25E: 9.3
- P/B (x) CY24E: 1.1
- P/B (x) CY25E: 1.0
- ROAE (%) CY24E: 11.8
- ROAE (%) CY25E: 11.7
- Net Yield (%) CY24E: 3.4
- Net Yield (%) CY25E: 3.8
Sector Outlook
HL Bank is positioned to benefit from the improved liquidity within the Malaysian banking system. With a focus on maintaining stable net interest margins (NIMs), HL Bank is expected to see continued growth, aided by easing competitive pressures on deposits and lending rates.
NIM Trends
HL Bank’s NIM guidance for FY24E stands at 1.90%, with expectations for slight improvement in FY25E at 1.91%. This reflects a stable outlook, with the bank successfully navigating the challenges of margin compression and competition within the sector.
Growth Potential and Earnings Revisions
If NIMs return to pre-pandemic levels, HL Bank’s earnings could experience a 2.3% upgrade for FY25E, bringing the net profit to 4,949 million MYR. This positive revision could also boost the ROE from 11.6% to 11.8%, signaling the bank’s capacity for stable earnings growth as the sector stabilizes.
Dividend Yield
HL Bank offers a relatively modest dividend yield, projected at 3.4% for CY24E and increasing to 3.8% for CY25E. Although not the highest in the sector, these yields reflect HL Bank’s steady financial performance and appeal to conservative, income-focused investors.
Stability and Upside Potential
With a target price of MYR 24.30, HL Bank presents a solid investment opportunity, offering a 15% upside potential. The bank’s sound fundamentals and strategic positioning in the sector contribute to a stable outlook for earnings growth, making it a reliable choice for investors looking for long-term stability.
Key Risks
Despite its stable performance, HL Bank faces risks associated with competitive pressures in the sector, potential fluctuations in NIMs, and broader macroeconomic factors that could impact growth. However, the bank’s strong fundamentals and solid balance sheet provide a buffer against these uncertainties.
