Thursday, August 25, 2011

OSK Research maintains BUY on RHB Capital

KUALA LUMPUR: OSK Research is maintaining its Buy call on RHB CAPITAL BHD [], with fair value at RM9.90.

It said on Thursday, Aug 25 RHB Capital reported annualised 1HFY11 results that were largely in line with its full year estimates.

OSK Research said the 1HFY11 earnings rose 13% on-year and 3% on-quarter, with earnings growth largely topline-driven, as total income rose 12.5% on-year while pre-provision operating profit rose 9.6% on-year and 8.8% on-quarter.

'Despite its relatively impressive earnings traction, we have taken a more prudent view on future economic headwinds and its potential negative impact on the asset quality of its unseasoned Easy Banking loans portfolio (2.6% of total group's loans base) which caters largely to the lower income mass market,' it said.

OSK Research said it was'' consequently increasing its credit cost for both FY11 and FY12 prompting a downward revision in FY11 and FY12 earnings by 2.3% and 6.8% respectively and a corresponding downgrade in fair value from RM10.16 to RM9.90.

'Our new fair value is based on 1.76 times FY12 PBV and underpinned by 14.1% ROE. As current valuation of 1.60 times FY12 PBV and 11.6x PER is already at a discount to industry's 1.85 times PBV and 13.6 times PER despite having ROEs that are in line with industry's, we see any further selling pressure as an opportunity to accumulate, Maintain BUY,' it said.

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