Brokers’ take: Analysts raise price targets on Maybank after strong Q3 turnout
Michelle Zhu
CGS-CIMB and UOB Kay Hian (UOBKH) have raised their price targets on Malayan Banking (Maybank) upon rolling over their estimates to FY2024.
This comes after the lender reported a 12.3 per cent year-on-year rise in third-quarter net profit to RM2.4 billion (S$677 million), in line with both brokerages’ expectations.
CGS-CIMB, which has an “add” rating on the Kuala Lumpur Stock Exchange-listed counter, raised its target to RM10.60 from RM10.30 previously while retaining its FY2023 to FY2025 earnings per share (EPS) forecasts.
The new price target implies a projected 10.1 per cent cost of equity and terminal growth rate of 4 per cent.
The research house projects Maybank to report RM2.7 billion in net profit for its upcoming Q4, up 23 per cent on the year.
“We expect this to be achieved on the back of better contributions from its insurance business (compared to negative contributions in Q3 FY2023 and Q4 FY2022), stable credit costs, flattish or a marginal increase in net interest income, and low single-digit rise in overheads,” said CGS-CIMB analyst Winson Ng in a report on Wednesday (Nov 22).
Meanwhile, UOBKH lifted its price target on Maybank to RM9.55 from RM9 previously while maintaining its “hold” call on the stock.
The new price target translates to a price-to-book (P/B) value of 1.16 times based on FY2024 estimates, as well as a return on equity rate of 10.5 per cent.
Its analyst Keith Wee noted that Maybank is currently trading at about half a standard deviation below its mean P/B valuations, which he deems as “fair”.
He anticipates the bank’s year-on-year operating expenditure growth to remain elevated at 9 per cent in FY2023, before reverting to “more sustainable” levels of 5 to 6 per cent in the next two years.
“Given our expectation of a more risk-on environment in H1 FY2024 on the back of (a) peakish interest rate cycle in developed markets, we think that CIMB has a better scope to outperform, given its higher beta and cheaper valuations.”
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