KUALA LUMPUR (Jan 5): RHB Investment Bank Research has upgraded Public Bank Bhd to “buy” at RM4.28 with an unchanged target price (TP) of RM5 and raised its net profit forecast for the group by 3% for FY2022 and 4% for FY2023-24 on assumptions of lower credit cost, better NIMs, and slightly higher non-interest income.

In a note on Thursday (Jan 5), RHB’s Fiona Leong and Nabil Thoo said their new forecasts point to healthy earnings growth of 19% in FY2023 vs the 5% increase in FY2022.

“Our RM5 TP (unchanged) is based on an intrinsic value of RM5.01 and a 0% ESG premium/discount, using our in-house methodology,” they said.

The analysts said the possibility of changes in major shareholding at Public Bank following the demise of its founder may limit its share price rerating.

“Still, at 1.5 times FY2023 P/BV against 13.5% ROE, its valuation is compelling in our view.

“This is especially so, given projected earnings growth of 19% for FY2023 and the huge provision buffers that can be released.

“Our TP is based on a GGM-derived P/BV of 1.8 times, which is slightly above -1SD from the historical mean,” they said.

Leong and Thoo said they see management remaining cautious on its lending business, given the uncertainty in global growth and prolonged political tensions.

“We expect loan growth to remain moderate at 5% y-o-y in FY2023, sustained versus the 4.7% projected for FY2022,” they said.