79% A- Fundamental Analysis for MALAYAN BANKING BHD. Page 1 of 13. Fundamental Analysis: FINANCIALS Sub-Sector: Company Description:

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1 Page 1 of 13 Fundamental Analysis for MALAYAN BANKING BHD Fundamental Analysis: 79% A- Company Name: MALAYAN BANKING BHD Board: Main Board Stock Code (Bursa): MAYBANK FBMKLCI: TRUE Bloomberg: MAY:MK Reuters: MBBM.KL Industry: FINANCIALS Stock Grade: Investment Grade Sub-Sector: Company Description: BANKS BANKING & FINANCE. Date of Analysis: 18-Nov-11 Price: 8.25 Income Statement Analysis (2011): Year over year, Malayan Banking Bhd has seen revenues remain relatively flat (6.1B to 6.1B), though the company was able to grow net income from 3.8B to 4.5B. Balance Sheet Analysis (2011): Malayan Banking Bhd uses little or no debt in its capital structure and may have less financial risk than the industry aggregate. Income Statement Analysis (Sep-11): Compared to the same quarter last year, Malayan Banking Bhd has been able to grow revenues from 1.4B to 1.8B. Most impressively, the company has been able to reduce the percentage of sales devoted to selling, general and administrative costs from % to 98.56%. This was a driver that led to a bottom line growth from 1.0B to 1.3B. Balance Sheet Analysis (Sep-11): Malayan Banking Bhd uses little or no debt in its capital structure and may have less financial risk than the industry aggregate.

2 Page 2 of 13 Shareholding Analysis: AMANAHRAYA TRUSTEES-SKIM AMANAH SAHAM BUMIPUTERAand EPF are major shareholders.

3 Score Card - Fundamental Analysis Item W R S Remarks 1 - History of Consistently Increasing Earnings, Sales & Cash Flow 1.1. Sales Revenue & Net Income After Tax increasing in the past 5 years Net Cash from Operations increasing in the past 5 years EPS increasing in the past 5 years 1.4. Growing/consistent in revenue and net profit in the last 5 quarters The current quarter's EPS is up more than 15% from the same quarter the year before EPS increasing in the past 5 quarters Sustainable Competitive Advantage & Strong Future Growth Drivers 2.1. Strong brand, monopoly or barriers to entry Gross Profit Margin (> 40%) & Net Profit Margin (> 10%) 2.3. Consistently high ROE > 15% Able to deliver double-digit growth in next years 2.5. ROIC > 15% Leverage is quite high 2.6. Strong future growth drivers Potential Risks Conservative Debt 3.1. Long term debt < 4 times Net Profit Debt/Equity Ratio < Leverage is quite high 3.3. Current Ratio > Healthy Cash Flow 4.1. Working capital increase slower than sales Short & declining "Cash Conversion Cycle" Free Cash Flow / Sales > 5% Management and Institutional Investors are Holding/Buying Stock 5.1. Management and Institutional Investors are Holding/Buying Stock Overall Score 79%

4 Market Timing Buy Criteria Criteria 1. The current quarter's EPS is up more than 15% from the same quarter the year before. 2. Price is below Intrinsic Value (20%) 3. Current EY% or Rolling 4Q EY% > 6% 4. Current DY% or Rolling 4Q DY% > 6% 5. Stock price breaks out of consolidation/dip on an uptrend. 6. Comparison of P/B ratio (for Financial stocks only) 7. Company owner, EPF, Khazanah and PNB heavily buying Applicable Remarks Sell Criteria Criteria 1. Current EY% or Rolling 4Q EY% < 6% for more than 2 years 2. Current DY% or Rolling 4Q DY% < 6% for more than 2 years 3. Quarterly EPS drop for 5 consecutive months 4. Fundamental of business turns unattractive or 5. bad Found a better opportunity to replace this stock 6. The stock drops near to my average cost. 7. Company owner, EPF, Khazanah and PNB heavily selling. Applicable Remarks

5 1 - History of Consistently Increasing Earnings, Sales & Cash Flow 1.1. Sales Revenue & Net Income After Tax increasing in the past 5 years. 25,000,000 20,000,000 15,000,000 10,000,000 5,000, Total Revenue Net Income 1.2. Net Cash from Operations increasing in the past 5 years EPS increasing in the past 5 years Even if EPS growth is not trendy, but it is acceptable if 3-Y or 5-Y EPS growth rate is more than 15%

6 1.4. Growing/consistent in revenue and net profit in the last 5 quarters. 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Turnover Net Profit 1.5. The current quarter's EPS is up more than 15% from the same quarter the year before. EPS Growth: 18.38% 1.6. EPS increasing in the past 5 quarters Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 EPS

7 2 - Sustainable Competitive Advantage & Strong Future Growth Drivers 2.1. Strong brand, monopoly or barriers to entry 1. Does it have a monopoly situation? No 2. Does it have a strong leading brand? Very Strong 3. Does it have a high barriers to entry? Very High 4. Does it have market leadership? Very Strong 2.2. Gross Profit Margin (> 40%) & Net Profit Margin (> 10%) Gross Profit: Profit After Tax: 12,787,600 Sales Revenue: 21,039,643 4,450,278 Minority Interest: 1,008,766 Gross Profit Margin: 61% Net Profit Margin: 26% 2.3. Consistently high ROE > 15% Able to deliver double-digit growth in next 3-5 years LT Growth Rate: 10.4

8 2.5. ROIC > 15% % 50.00% 0.00% % % % %

9 3 - Conservative Debt 3.1. Long term debt < 4 times Net Profit Long Term Debt: 21,010,500 Long Term Debt < 4 times Current Net Earnings (After Tax): Debt/Equity Ratio < 1 Debt/Equity Ratio: Current Ratio > 1 Current Ratio (MRQ): 1.11

10 4 - Healthy Cash Flow 4.1. Working capital increase slower than sales 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% Revenue Growth YOY Working Capital Growth YOY 4.2. Short & declining "Cash Conversion Cycle" Cash Conversion Cycle Free Cash Flow / Sales > 5% Free Cash Flow/Sales: 14.76%

11 Market Timing 1. The current quarter's EPS is up more than 15% from the same quarter the year before. EPS Growth: 18.38% 2. Price is below Intrinsic Value (20%) Estimated IV: 8.5 to 10 Discount from IV: 2.9% 17.5% Discounted Cash Flows: Valuation by Estimated EPS and PE: Valuation by Price-to-book Ratio: Fair Value from Analysts 10Y IV: (Growth rate: 6%) 2011: : : 9.66 OSK: 9.60 HLG: 8.87 ECMLIBRA: Current EY% or Rolling 4Q EY% > 6% CU EY%: 7.21 Rolling 4Q EY%: Current DY% or Rolling 4Q DY% > 6% CU DY%: 7.27 Rolling 4Q DY%: 7.273

12 Future Growth Drivers, Potential Risks and Analysts' Reports Reported Date Subject Details Type Created Date 8/30/2011 Analysts see slower H2 for banks Most banking analysts are now guiding for a slower second half, based on the souring global economic outlook as well as the latest banking data released in July. News 8/30/2011 Analysts say the July statistics show the growth momentum of all three lending indicators slowed considerably, with monthon-month growth rate of loan applications, loan approvals and disbursements dropping by 5.3%, 15.4% and 13.8% to RM65.3bil, RM32.2bil and RM64.1bil respectively. Property loans remained the key growth driver, accounting for 40.6% of the year-to-date credit expansion, followed by working capital loans at 23.6%. We expect the growth momentum of property loans to taper off going forward, with the May overnight policy rate (OPR) hike starting to take effect and a more stringent credit policy instigated by banks, ECM Libra research head Bernard Ching said. A banking analyst with RHB Research said the amount of loans approved by the banking system, which provides an indication of disbursements in the months ahead, had slowed to 4.9% year-on-year in July, following a moderation to 14.2% in June and off a high of 44.7% in March. This suggests loan growth may have peaked.

13 8/23/2011 Maybank FY11 Results Review - In See attachment Analyst Report 8/23/2011 Line (MAY MK, BUY, FV: RM9.60, Last close: RM8.64) 8/4/2011 Banks growth likely to slow The banking sector is expected to see a slowing of its growth Potential Risk 8/4/2011 momentum, albeit moderately, in the second half of this year as it could be impacted by the global economic uncertainties like the ongoing sovereign debt crisis in Europe and the raising of the US debt ceiling, analysts said. Analysts and industry observers said credit expansion would be sustained throughout the remaining months and much would be dependent, for example, on how fast the Government s projects under the Economic Transformation Programme (ETP) kicks off, and the 10th Malaysia Plan. Analysts are projecting loan growth this year to be in the region of 11% to 15%. The banking system s total loan growth for the first six months to June stood at about 7% unannualised. OCBC Bank (M) Bhd economist Gundy Cahyadi told StarBiz that although Malaysia s economic expansion would continue to mean a good year for the banking sector, its performance might not be as robust as witnessed in the first half of this year, especially in the first quarter, at which point both the return on assets and return on equity hit recent highs.