MALAYAN BANKING BHD (MAYBANK) All figures in millions of Ringgit Malaysia except per share values and ratios Analysis Date: 16/06/2013 Financial Year: 2012 31/12/2012 Latest Quarter: 31/12/2012 Price: 10.18 Stock Category: Large Capital Growing Overview (Reuters): Malayan Banking Berhad (the Bank) is engaged in the commercial banking and related financial services. The Company s subsidiaries are principally engaged in the businesses of banking and finance, Islamic banking, investment banking, including stock broking, underwriting of general and life insurance, general and family takaful, trustee and nominee services, asset management and venture capital. Maybank operates in four segments: Community Financial Services (CFS), Global Wholesale Banking (GWB), Insurance, Takaful and Asset Management and International Banking. It has operations in Malaysia, Singapore, Indonesia, Philippines, Papua New Guinea, Brunei Darussalam, People s Republic of China, Hong Kong SAR, Vietnam, United Kingdom, United States of America and Cambodia and Bahrain. On June 11, 2012, the Company liquidated Aseam Malaysia Nominees (Asing) Sdn Bhd. Overview (Bloomberg): Malayan Banking Berhad and its subsidiaries provide various banking and financial services. As of June 30, 2009, the company operated 450 branches. The company s product and service range includes commercial banking, investment banking, Islamic banking, offshore banking, insurance and takaful, factoring, trustee services, asset management, stock broking, nominee services, venture capital, and Internet banking. The company provides various services and products, including mortgage and automobile financing, credit and debit cards, bancassurance, wealth management, as well as retail and Internet banking. Segments The company operates in four segments: Banking, Investment Banking, Insurance and Takaful, and Others. Banking The Banking segment offers consumer and business banking products and services. It provides consumer banking products and services to individuals, including savings and fixed deposits, remittance services, and current accounts; consumer loans, such as housing loans and personal loans; unit trusts; bancassurance products; and credit cards. This segment also offers business banking products and services, which include long-term loans, such as project financing; short-term credit comprising overdrafts and trade financing; and fee-based services, including cash management and custodian services to large corporate and public sector, and small and medium enterprises. Corporate and Business Banking, which include corporate and commercial segments, caters to public listed companies, multinationals and institutional clients, as well as SMEs through various services that include cash management and trade financing. Investment Banking The Investment Banking segment engages in the business of discount house and securities Board: Main Board FBMKLCI: YES Industry: FINANCIALS Sub-Sector: BANKS Ownership: Corporate Owned (Local);Government & Politically Linked Investment Strategy Portfolio Strategy: Lump Sum + Top Up Averaging Down Method: Dollar Cost/Value Averaging Portfolio Execution: Buy and Monitor Basis for Buying & Selling: Absolute P/E DY % EPS EY % OSCILLATOR Institutional Sponsorship Market Direction
Due-Diligence Measures 2003/6/30 2004/6/30 2005/6/30 2006/6/30 2007/6/30 2008/6/30 2009/6/30 2010/6/30 2011/12/31 2012/12/31 5-Y Avg. 10-Y Growth 5-Y Growth Sparkline Grade Profitability Consistently increasing Sales 9,147,143 10,520,920 11,215,887 12,701,748 15,179,312 16,153,942 17,586,337 18,560,232 12,884,511 27,532,461 20,611 9.03% 7.55% Revenue (Pref. 8%) Consistent and increasing ROE 14.63% 16.58% 15.03% 16.72% 16.94% 15.17% 2.78% 13.70% 7.72% 13.60% 11.10% -7.25% 8.04% (Pref. 15%) Consistent and increasing ROIC 2.69% -460.14% 3.43% -7.59% -16.52% -6.52% 7.58% 32.98% 1.67% 3.36% 7.49% 1.70% 0.10% (Pref. 15%) Consistent (or increasing) Net 2.91% 2.93% 2.93% 2.80% 2.80% 2.70% 2.80% 2.90% 2.50% 2.40% 2.56% -1.78% -3.49% Interest Margin Declining Cost/Income Ratio (Pref. 39.90% 40.20% 39.40% 39.70% 42.80% 44.40% 52.20% 46.50% 49.70% 48.60% 48.66% 3.00% 1.32% 40%) Cash Flow Consistently increasing Net Cash 1,370,826 7,820,778 2,007,014 13,146,801 6,473,693-5,247,770-7,375,673 7,278,267 5,449,986-13,235,494-4,030-80.31% -260.22% from Ops. (Pref. 8%) Consistent and increasing CROIC 1.80% -1506.24% 2.73% -34.45% -33.23% 11.34% -47.50% 61.19% 3.40% -7.73% 3.36% 6.22% 0.05% (Pref. 15%) Financial Risks Increasing Debt Coverage Ratio 42.07% 263.25% 66.66% 337.97% 101.17% -62.06% -45.60% 44.35% 19.45% -44.00% -14.61% -2.04% 0.98% (Pref. 150%) Increasing Quick Ratio (Pref. 47.40% 75.16% 32.60% 93.86% 96.21% 90.36% 86.18% 91.90% 42.59% 38.69% 56.07% -0.57% -24.01% 100%) Asset Quality Consistent and increasing Tier-1 10.61% 10.30% 10.50% 9.70% 9.00% 10.10% 10.80% 10.55% 11.35% 1315.00% 558.63% 26.98% 97.88% Capital% (Pref. 10%) Declining Net Impaired Loans (Pref. < 1.5%) 6.20% 6.00% 4.90% 3.80% 3.00% 1.90% 1.60% 1.20% 1.90% 1.10% 1.42% -20.42% -9.21%
Growth Quality Column1 2003/6/30 2004/6/30 2005/6/30 2006/6/30 2007/6/30 2008/6/30 2009/6/30 2010/6/30 2011/12/31 2012/12/31 Revenue % 9147143 10520920 11215887 12701748 15179312 16153942 17586337 18560232 12884511 27532461 Year over Year -2.61% 15.02% 6.61% 13.25% 19.51% 6.42% 8.87% 5.54% -30.58% 113.69% 3-Year Average 5.68% 10.19% 9.42% 15.13% 12.02% 7.36% 6.94% -15.55% 19.72% 5-Year Average 8.08% 12.01% 11.60% 11.40% 9.06% -1.89% 7.55% 10-Year Average 7.05% 9.03% EBIT % 2619769 3355244 3495196 4031106 4370331 4086912 1574788 5248573 3489167 7742123 Year over Year 10.01% 28.07% 4.17% 15.33% 8.42% -6.49% -61.47% 233.29% -33.52% 121.89% 3-Year Average 17.14% 14.42% 9.18% 11.17% 0.69% -51.04% 12.51% 39.78% 19.44% 5-Year Average 13.41% 12.07% 6.18% -15.81% -4.93% -2.00% 20.73% 10-Year Average 3.07% 5.56% Net Income % 1996489 2424511 2502526 2803598 3252871 2928202 691875 3818167 2583069 5744696 Year over Year 21.44% 3.22% 12.03% 16.02% -9.98% -76.37% 451.86% -32.35% 122.40% 3-Year Average 11.30% 7.26% 13.11% 2.17% -77.39% 13.27% 65.87% 20.43% 5-Year Average 11.22% 6.40% -25.28% -9.30% -1.96% 26.65% 10-Year Average 4.71% EPS % 0.56 0.673 0.684 0.744 0.826 0.601 0.12 0.539 0.344 0.727 Year over Year 20.43% 20.18% 1.63% 8.77% 11.02% -27.24% -80.03% 349.17% -36.18% 111.34% 3-Year Average 18.49% 10.00% 5.01% 9.43% -10.67% -96.46% -5.44% 52.66% 14.96% 5-Year Average 11.40% 8.78% -0.38% -36.94% -25.74% -18.61% 14.34% 10-Year Average -7.20% -5.66% Cash From Ops. % 1370826 7820778 2007014 13146801 6473693-5247770 -7375673 7278267 5449986-13235494 Year over Year -12.64% 44.16% -27.61% 73.08% -25.29% -59.47% -26.64% 250.07% -8.91% -100.00% 3-Year Average 11.53% 2.13% 11.27% 12.85% -59.74% -60.65% 47.16% 57.98% -726.70% 5-Year Average 9.55% 8.25% -16.82% -31.07% -17.16% 8.37% -260.22% 10-Year Average -3.18% -80.31% Free Cash Flow % 1263677.44 7907958.84 2002392.6 13170430.32 6418356.97-5258555.78-7401239.5 7304174.25 5342085-13364526 Year over Year 45.42% -27.76% 72.68% -25.45% -59.03% -26.43% 246.60% -9.49% -100.00% 3-Year Average 2.46% 11.05% 12.63% -59.29% -59.96% 46.80% 57.16% -727.08% 5-Year Average 8.25% -16.77% -30.79% -16.99% 8.24% -260.68% 10-Year Average -3.64% -80.33% 30,000,000 Growth Quality 15,000,000 25,000,000 10,000,000 20,000,000 5,000,000 15,000,000 0 10,000,000-5,000,000 5,000,000-10,000,000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Revenue EBIT Net Income Cash From Ops. FCF -15,000,000
Stock vs Sector BANKS Stock Board Market Cap PE Dividend Yield EPS ROE ROR ROTA AFFIN M 6411.731 10.19 3.5 0.421 10.41 21.16 1.13 AFG M 8081.113 16.84 2.55 0.315 13.06 36.09 1.21 AMBANK M 22335.111 14.79 2.71 0.505 13.54 18.89 1.35 BIMB M 4267.16 20.94 2.7 0.191 11.14 13.66 0.53 CIMB M 62145.34 14.32 2.87 0.584 15.20 32.09 1.29 HLBANK M 26544.315 16.1 2.69 0.992 14.43 30.29 1.05 HLFG M 15791.52 13.67 1.67 1.111 13.76 20.68 0.68 MAYBANK M 90639.938 15.77 6.23 0.727 13.60 20.87 1.16 PBBANK M 59972.103 15.49 2.94 1.105 21.56 27.52 1.41 RHBCAP M 21549.957 14.35 0.93 0.689 13.13 26.99 0.99 Stock vs Sector 200.00% 180.00% 160.00% 140.00% 120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% 75.70% 171.51% 14.30% 13.17% 16.60% 2.44% Debt to Equity - 5Y Avg EPS - 5Y Growth Net Profit Margin - 5Y Avg 8.00% 10.30% 7.55% 12.08% ROE - 5Y Avg Sales - 5Y Growth Company Sector
Economic Moat Area Key Ratios Monopoly situation Brand leadership / Operating strategy Barriers to Entry Marketship leadership Economic Moat Comments - Record earnings with profit after tax and minority interest (PATAMI), growing 17.6% to RM5.74 billion on the back of sustained growth in net fund based income and fee based income, supported by improved cost efficiency. - Record earnings with profit after tax and minority interest (PATAMI), growing 17.6% to RM5.74 billion on the back of sustained growth in net fund based income and fee based income, supported by improved cost efficiency. - Completed a landmark equity placement of RM3.66 billion, the largest in Malaysian corporate history to strengthen capital position ahead of Basel III, and support the Group s operations. - The Group s cost-to-income ratio improved by 130 basis points to 48.6% from 49.9% in the corresponding twelve-month financial period ended 31 December 2011. - Allowance for impairment losses on loans, advances and financing increased by RM193.7 million to RM642.7 million for the year ended 31 December 2012. The increase was mainly due to higher individual allowances made. The Group s net impaired loans ratio improved to 1.09% as at 31 December 2012, compared to 1.86% as at 31 December 2011. In addition, the loan loss coverage ratio as at 31 December 2012 improved to 105.6% from 86.9% as at 31 December 2011. - Face strong competition from CIMB and PBBANK - No significant differentiation from CIMB and PBBANK except its market capital is the largest one. High start-up costs - No significant differentiation from CIMB and PBBANK except its market capital is the largest one. Maybank is now the most valuable company listed Bursa Malaysia with a market capitalisation of RM77 billion (or USD25 billion); and one of the top banking groups in Southeast Asia with total assets of RM495 billion (more than USD150 billion). Future Growth Strategy/Drivers Source Annual Report Future Growth Strategy/Drivers With solid momentum generated in 2012 and positive macro economic conditions across our home markets, I am confident of another strong financial performance in 2013. But we remain prudent, too, and given the higher capital requirements of Basel III the Board has set a headline KPI of 15.0% ROE on the enlarged capital base. In 2013, we will accelerate our transformation and sharpen our focus on our five strategic goals. We will strengthen our performance, manage expenses prudently, and grow profitably and responsibly. We will raise the tempo of our regional expansion and build our resources regionwide. And we will continue to leverage on our operations regionally, ensuring we remain agile in grasping opportunities.
Analyst Reports http://klse.i3investor.com/servlets/fdnews/216762.jsp Malaysia's largest lender by asset, Malayan Banking Bhd (Maybank) has upped the ante to capture the country's affluent individuals, with the launch of Maybank ASPIRE. The bank is targeting at least 60,000 customers from its existing base of 300,000 affluent customers, to sign up for the service by early 2015. Maybank estimates that ASPIRE -- a comprehensive suite of financial solutions -- will boost its growth in total financial assets of the affluent segment to 27 per cent by 2015, reaching some RM129 billion. Speaking at the launch, Datuk Lim Hong Tat, Maybank deputy president and head of community financial services, noted that its high net worth and affluent customer base has been growing three times faster than that of the mass segments within the last three years. The bank's customer base growing well at a rate of 10.8 per cent, outpacing market growth of some 9.2 per cent in the last two years. Risk Management Source Annual Report - Analyst Reports Risks - Decreasing net interest margin and slow loan growth. Basically, all banks are facing the same issue.
Shareholder Wealth Creation Buy and Monitor Return (Pref. 8%) 8% 3-Y Price CAGR % 13.17% 5-Y Price CAGR % 10.37% 10-Y Price CAGR % 5.75% Full History Price CAGR % 9.95% Consistent and increasing Dividend Payout % (Pref. 60%) 60% 160.00% 140.00% 120.00% 100.00% 80.00% 60.00% 40.00% 20.00% Dividend Payout % 0.00% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Increasing EPS EPS 0.9 0.8 0.7 0.6 0.5 0.56 0.673 0.684 0.744 0.826 0.601 0.539 0.727 0.4 0.3 0.344 0.2 0.1 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 0.12
Increasing DPS DPS 1.2 1 1.025 0.8 0.85 0.8 0.6 0.52 0.6 0.525 0.55 0.65 0.4 0.36 0.2 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 0.08 Historical Weekly Price Chart
Good PE Base PE2 Bad PE3 Expected Ea rni ngs Growth 13.00% 16 10.00% 15 7.00% 13 Di vi dend Yi el d 6.39% 6 6.39% 6 6.39% 6 Business Risk Factor 1.22 Financial Risk Factor 1.22 Earnings Visibility Factor Fair P/E 12 11 10 Current EPS Fair Price Margin of Safety Buy P/E Buy Price Expected DPS Expected Dividend Yield Sell P/E 1.16 0.73 8.51 7.78 7.06 7.95 7.27 6.59 0.73 9.35% 10.32% 14.23 12.78 11.39 5.78 47.22% 8.56% Sell Price 10.34 9.29 8.28 5.29 4.79 Market Timing EY % Oscillator EY% Price ($) High Low Green Zone EY% 7.33% Green Zone Price($) RM9.28 7.14% Price ($) RM9.52 10% Trading Range 1.91% 5.61% Price ($) RM12.12 10% Red Zone EY% 5.42% Red Zone Price($) RM12.54 Low High Buy Under 9.52 Sell Above 12.12 The current quarter's EPS is up more than 15% from the same quarter the year before. 0.25 Quarterly EPS 0.20 0.15 0.13 0.15 0.16 0.16 0.16 0.17 0.17 0.18 0.19 0.19 0.17 0.18 0.10 0.05 0.00 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Mar-12 0.18 Mar-13 0.18 Growth 1.36%
Notes Created Date Note 15/06/2013 http://klse.i3investor.com/blogs/valueinvestorresearchklse/31511.jsp The new chief to helm Malayan Banking Bhd, will be announced as early as end-june 15/06/2013 After further study, I think EY% oscillator suits MAYBANK the most because the trading range of EY% is very tight which is less than 2%. 05/04/2013 Based on absolute P/E valuation, fair price for the good scenario is 8.68, which means MAYBANK is slightly overvalued. Nevertheless, if we refer back to historical EY%, there is an opportunity to buy in at this time, and the future price may increase up to 12.72. I will wait until General Election end and look for opportunity to add positions.