Tuesday, October 18, 2011

ECM Libra maintains Hold on Public Bank, cuts TP to RM11.40

KUALA LUMPUR: ECM Libra Investment Research has maintained its Hold rating on PUBLIC BANK BHD [] and said the banking group's 9MFY11 results offered no surprises as Public Bank posted another strong set of results with net profit increasing 18.4% y-o-y to RM2.61 billion on the back of 13.8% YTD gross loans growth and lower loan loss allowance.

In a note Tuesday, Oct 18, ECM Libra said retail loans, particularly property loans, remained the main loans growth driver for Public Bank.

The research house said despite the recent selldown, it was reiterating its hold call on Public Bank given its high exposure to retail lending, and in particular property lending, which is exposed to risk of slowdown going forward.

'We lower our target price from RM14.20 to RM11.40 by changing our valuation method from P/E (CY11 15 times) to P/B (CY12 2.4 times).

'Our revised target price, which is based on historical average P/B implies a ROE of 18%, which is inline with historical average, as compared to cyclical high ROE of 24.2% in CY11,' it said.


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