TA finds Public Bank valuations attractive, raises TP to RM20.30

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KUALA LUMPUR (Jan 28): TA Securities Holdings Bhd upgraded Public Bank Bhd shares to “hold" from “sell” with a higher target price of RM20.30 from RM18.30.

In a report today, TA said Public Bank's (fundamental 2.8, valuation 1.2) valuations looked attractive as its current price to book value (PBV) ratio is at a 10-year low of 2.3 times.

“Based on FY15e PBV of RM7.75, PBB (Public Bank share) would be valued at RM17.80. As such, the downside risk to the stock’s fundamental share price should be limited,” TA said.

TA's report indicated that foreign shareholding level in Public Bank had stayed resilient above 30% as investors continued to value the group for its solid management team and sound asset quality.

At 11:08 am, Public Bank shares were unchanged at RM18.12 for a market capitalisation of RM69.97 billion.

The stock had fallen 1% this year, underperforming the FBM KLCI's 2% advance.

Looking ahead, while TA expects substantial provisions for the banking sector, it said Public Bank's above average loan profile should help it weather challenging backdrops.

“Supported by healthy loans growth, which management believe would again surpass industry’s average due to its hire purchase, mortgage and SME portfolios, PBB guides that loans growth for 2015 would be 9%-10% (i.e. above industry’s 8%-9%).

TA also expects Public Bank to offer more attractive deposit promotions to strengthen its deposit base. Public Bank is also said to be looking into opportunities to earn fees through foreign exchange trades and related activities.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)