KUALA LUMPUR (Dec 13): CGS-CIMB Securities has maintained its “add” rating on Public Bank Bhd at RM4.41 with a target price of RM5.20 and said while the demise of the bank’s founder and chairman emeritus Tan Sri Dr Teh Hong Piow is a loss to the bank, it does not expect this to materially affect the outlook of the bank as it is backed by a strong management team.
In a note on Monday (Dec 12), the research house said Teh’s demise would trigger a major change in the shareholding structure of Public Bank.
CGS-CIMB said the late Teh was the largest shareholder of Public Bank with a 23.41% stake (or 4.54 billion shares) as at March 14, 2022.
“Based on the closing price of RM4.40 for PBB on Dec 12, Teh’s stake carries a total value of RM20 billion.
“His demise would lead to a material change in the shareholding structure of Public Bank with the potential emergence of new major shareholders.
“However, we do not have any knowledge on the arrangement by the late Teh for these shares. The possibility of M&As for PBB in the future depends on the plans by the person(s) who will inherit these stakes, in our view,” it said.
The research house said highlighted that according to Section 92 of Financial Services Act, individuals are prohibited from owning more than 10% stake in a financial institution unless they already held the stake before June 30, 2013.
“As such, for the individual(s) who will inherit Teh’s stake in Public Bank, he/she (they) cannot hold more than 10% stake per person,” it said.
CGS-CIMB said the above news could have near-term knee-jerk effect on the share price of Public Bank but there will be limited impact from this on the near-term earnings outlook of the bank.
“As such, we reiterate our 'add' call on the stock premised on the potential rerating catalyst from it having one of the lowest credit costs among its peers should the economic environment deteriorate in 2023 and from potential write-back in management overlay.
“We maintain our FY22-24F EPS forecasts and DDM-based target price of RM5.20 for Public Bank,” it said.
At 9.10am, Public Bank dipped 0.23% or one sen to RM4.39 with 378,400 shares done.