Kenanga Research maintains Outperform on Public Bank (1295)

KUALA LUMPUR: Kenanga Investment Bank Research expects Public Bank's
second quarter earnings, to be announced on July 23, to be marginally
weaker on a quarter-on-quarter basis, largely driven by the
normalisation of its credit cost.
It said on Friday the overall first half earnings would still likely match consensus and its expectations.
“As
such, there is unlikely to be any changes in ours and the consensus
estimates after the results. We reiterate our OUTPERFORM rating on
Public Bank with an unchanged target price of RM15.60 based on 2.9
times FY13 price-to-book value (P/BV), implying 13.0 times
price-to-earnings ratio (PER) of FY13E earnings,” it said.
Kenanga Research
said it was also the right time now to turn more positive on the bank
due to the rising investors' preference for defensive stocks.
“This
trend is set to be a major rerating catalyst for Public Bank going
forward in H2, 2012 given the expectation of rising dividends for the
bank, a better free cash flow generation, its consistent ROE and also
its high earnings visibility,” it said.
The research house said the bank's share price in fact had performed well, up +4.4% since June 2012.
On the second quarter earnings, it forecast a profit after tax of RM850mil, 3.3% lower than Q1, 2012's RM877mil.
Kenanga
Research said this was because it expected potential normalisation in
its credit cost to 32bps (on annualised basis) vs. 1Q12's 7bps and
partly offset by a lower operating cost. As such, H1, 2012 net profit
of RM1.725bil should be in line with its and the street's estimates.