KUALA LUMPUR (June 21): The strength in Public Bank Bhd's foreign shareholding level reflects confidence in the stock's defensive qualities due to the bank's healthy asset quality and earnings growth prospects, TA Securities Holdings Bhd said.

Amid rising global volatility and uncertainty in the domestic market, the research house said in a note today Public Bank's fundamentals remain sound.

"Boasting healthy asset quality (with gross impaired loans ratio 0.5% vs. industry's 1.6%) and modest earnings growth prospects (of around 8%), we predict respectable return on equity of around 15% for FY18-20.

"Rising to an all-time high of around 39.5% in March 2018, the foreign shareholding level (of Public Bank) has only eased to around 39.1% (based on latest May data) since the general election (in Malaysia)," TA Securities said.

According to the research house, given increased market volatility due to global trade tension and rising interest rate concerns, TA Securities readjusted its assumption on market risk premium for the research firm's Gordon Growth Valuation Model to 5.5%.

"Based on forward FY19 earnings, we tweak Public Bank's target price to RM25.80 from RM29.50. We reiterate our BUY recommendation on Public Bank," TA Securities said.

At Bursa Malaysia today, Public Bank shares were traded at RM22.38 at 12:14pm.