This article first appeared in The Edge Financial Daily on October 23, 2018
Malayan Banking Bhd
(Oct 22, RM9.60)
Maintain hold with a target price (TP) of RM10: In contrast to other mortgage schemes in place, HouzKey was set up as an alternative route for homeownership via the rent-to-own scheme requiring only a three-month rental deposit for homebuyers to move into their homes immediately.
They can also opt to purchase the houses, after a minimum of one year of renting, at a pre-determined price.
Malayan Banking Bhd (Maybank) is the first financial institution that introduced the scheme besides property developers.
Targeting the middle-income 40 (M40) segment, the minimum salary to qualify under the scheme is RM5,000 per month (for single or joint incomes). Thus, we believe the pricing is targeting the M40 segment. We are of the view that the HouzKey scheme caters for younger customers and those with higher disposable income.
The scheme is well-supported by Bank Negara Malaysia (BNM) in view of various issues concerning housing affordability. Additionally, the scheme was part of Maybank’s environmental, social and governance initiative and also part of BNM’s efforts towards its “Value-Based Intermediaries — Beyond Profit” objective.
Maybank has allocated the similar risk-weighted asset (RWA) for the HouzKey scheme. The RWA is higher when borrowers do not opt to buy the houses as they will be parked under Maybank’s inventory until new potential buyers are found for the properties. This translates into a similar average asset yield compared with the traditional mortgages yield.
Of the RM1 billion allocation for the scheme, Maybank indicated it has not fully utilised the allocation due to higher rejection rates. This is due to tighter credit control as the scheme carries higher credit and market risks to Maybank.
Approaching a year since it was launched, no dropout has been seen for the HouzKey scheme, indicating its tighter credit control. For now, the properties are only listed in the Klang Valley and the scheme extended to the secondary market. Interestingly, for the secondary market, the properties will not be in Maybank’s inventory until potential buyers express interests in buying the properties.
We leave our forecasts unchanged. We maintain our “hold” rating and TP of RM10. Maybank is due to release its third quarter for financial year 2018 results at end-November. We believe the uncertainties in the business segment and the end of the tax holiday period will normalise loan growth. Therefore, we believe Maybank will deliver another set of soft results given its balanced book between household and non-household. — Hong Leong Investment Bank Research, Oct 22