PP 7767/09/2010(025354)

26 March 2010

Malaysia Corporate Highlights

RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

New s Upda te
26 March 2010
MARKET DATELINE

Malayan Banking Share Price

Fair Value
:
:
RM7.39
RM8.96
Dividend Reinvestment Plan Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (MAYBANK; Code: 1155) Bloomberg: MAY MK

Net EPS
FYE PBT Profit EPS Gwth PER Book P/Book C.EPS* Div Div Yld ROE
June (RMm) (RMm) (sen) (%) (x) (RM/s) (x) (sen) (sen) (%) (%)
2009^ 3,163.1 2,180.6 37.8 -29.8 19.5 3.5 2.1 - 8.0 1.1 9.9
2010 (f) 4,968.9 3,634.4 51.3 35.7 14.4 3.8 1.9 44.0 29.0 3.9 14.0
2011 (f) 5,908.7 4,292.7 60.7 18.1 12.2 4.2 1.8 51.0 35.0 4.7 15.2
2012 (f) 6,639.1 4,823.4 68.2 12.4 10.8 4.5 1.6 59.0 39.0 5.3 15.7
Main Market Listing / Trustee Stock / Non-Syariah-Approved Stock By The SC ^ Normalised * Consensus Based On IBES

Issued Capital (m shares) 7,078.0

♦ Dividend reinvestment plan (DRP). Maybank proposed a recurrent
Market Cap (RMm) 52,306.3
and optional DRP that allows shareholders to reinvest their dividend into Daily Trading Vol (m shs) 7.0
new shares. The issue price of the new shares will not be more than 10% 52wk Price Range (RM) 3.66 – 7.65
discount to the 5-day volume weighted average market price (VWAMP) Major Shareholders: (%)
prior to the Price Fixing Date. The board will have absolute discretion to Skim Amanah Saham 46.8
Bumiputera
determine whether this plan is applicable to the whole or portion
EPF 11.0
(electable portion) of declared cash dividend. Shareholders will have the
PNB 5.6
option to either elect to receive the electable portion in cash or in new
Maybank shares. Fractional shares will be paid in cash while shareholders FYE Jun FY10 FY11 FY12
can trade odd lots on the Odd Lot Market with minimum size of one share. EPS chg (%) - - -
Var to Cons (%) 16.7 18.9 15.5
♦ Financial impact – EPS dilution but enhance capital ratios.
Assuming in the most extreme case whereby the board decides to apply PE Band Chart

this plan to 100% of FY11-12 cash dividend (based on our projections)

and all shareholders elect to accept the dividend in shares, its FY11-12
EPS would be diluted by 5% and 10% respectively. However, both its
PER = 15x
Tier-1 and RWCAR capital ratios for FY11-12 would be boosted by 130bps PER = 12x
and 196bps respectively. PER = 9x

♦ Actual impact would be based on board decision as well as

discount to market price. The above is for illustration purpose as we
believe that the board is unlikely to apply the plan to 100% of the cash Relative Performance To KLCI
dividend given the cash dividend requirement of its major shareholder.
Moreover, shareholders’ decision will depend on the magnitude of
discount to the VWAMP as well as their view on Maybank share price’s
Maybank
short-term outlook given that the new shares will only be listed 30 trading
days after the announcement of price fixing and books closure date.

♦ Forecasts unchanged as it is premature to determine the impact. FBM KLCI

♦ Investment case. With significant positive earnings surprises for two

consecutive quarters, we now expect its ROE to jump back to the 15%
level (matching FY08 ROE), albeit just a tad lower than the 16-17%
achieved during FY04-07. With strong organic growth from domestic
operations, Singapore and especially BII, the negative impact from the Low Yee Huap, CFA
(603) 92802175
expensive acquisitions (of BII and MCB) would be more than nullified as
low.yee.huap@rhb.com.my
FY11 EPS is expected to exceed pre-acquisition levels. Thus, its PER and
P/B no longer deserve to be the only stock trading near one standard
deviation below their post Asian financial crisis means. We expect some
heavy catch up in share price performance and now prefer Maybank as
our top pick in the sector. Our fair value is pegged at RM8.96 based on
16x (benchmark) CY10 EPS. Maintain Outperform.

Please read important disclosures at the end of this report. Page 1 of 3

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Table 2. Earnings Forecasts Table 3. Ratio Analysis & Forecast Assumptions

FYE Jun (RMm) FY09a FY10F FY11F FY12F FYE Jun FY10F FY11F FY12F

Net Interest Income Asset Quality (%)

(+ Islamic Banking) 7,143.8 8,161.5 8,756.1 9,456.1 Gross NPL 3.20 3.00 2.80
Non-interest Income 3,177.7 4,446.7 4,669.0 4,986.5 Net NPL 1.40 1.31 1.25
Operating Income 10,321.5 12,608.2 13,425.1 14,442.6 SP / NPL 57.00 57.00 56.00
GP / Net Loans 1.96 1.96 1.96
Less: Overhead Loan Loss Coverage 117.04 121.06 124.64
Expenses -5,559.2 -6,331.8 -6,711.8 -7,114.5 Core Capital Ratio 11.60 11.76 11.96
Pre-provision RWCAR 15.60 15.78 16.00
Profit 4,762.4 6,276.3 6,713.3 7,328.2
Margins (%)
Less: Loan Loss Yields On Earnings Assets 3.90 3.85 3.85
Provisions -1,698.8 -1,447.4 -957.5 -857.2 Avg. Cost Of Funds 1.67 1.67 1.67
BII Deposit 483.8 0.0 0.0 0.0 Interest Spread 2.23 2.18 2.18
Operating Profit 3,547.4 4,828.9 5,755.8 6,471.0 Un-adj NIM (ex-Islamic Inc) 2.34 2.29 2.30
Adjusted NIM (+Islamic Inc) 2.85 2.83 2.87
Associates 99.5 140.0 152.8 168.1
Impairment on MCB -1,972.6 0.0 0.0 0.0 Profitability (%)
Pretax Profit 1,674.3 4,968.9 5,908.7 6,639.1 ROE 14.01 15.22 15.66
ROA 1.12 1.23 1.30
Less: Tax -923.6 -1,242.1 -1,506.7 -1,693.0 Cost / Income Ratio 50.22 49.99 49.26
Effective Tax Rate Expenses / Avg. Assets 1.95 1.92 1.91
(%) 55.2 25.0 25.5 25.5 Provisions / Avg. Net Loans 0.75 0.46 0.38
Profit After Tax 750.7 3,726.8 4,402.0 4,946.2
Liquidity (%)
Minorities -58.8 -92.5 -109.2 -122.7 Loan Deposit Ratio 86.74 86.85 86.98
Net Profit 691.9 3,634.4 4,292.7 4,823.4 Net / Gross Loan Growth 8.00 7.00 7.00
Source: Company data, RHBRI estimates Deposit Growth 9.00 7.00 7.00
Source: RHBRI estimates

Table 4. Sector Comparison

Bank Price FV PER (x) CAGR P/Book (x) ROE (%)
(RM/s) (RM/s) Rec CY08 CY09 CY10 (%) CY08 CY09 CY10 FY08 FY09 FY10
Public Bank - F 11.60 13.12 OP 15.1 15.4 13.5 10.6 4.1 3.5 3.1 27.3 24.5 24.2
Public Bank - L 11.64 13.12 OP 15.1 15.5 13.6 10.6 4.1 3.5 3.1 27.3 24.5 24.2
Maybank 7.39 8.96 OP 16.8 16.2 13.2 21.7 2.1 1.8 1.9 9.9 12.1 12.8
CIMB Group 13.96 16.24 OP 25.6 17.8 14.8 18.1 2.9 2.5 2.3 11.9 15.0 16.1
AMMB 4.97 6.13 OP 15.7 13.1 11.1 13.7 1.6 1.4 1.2 11.6 11.8 12.1
EON Capital 7.03 8.07 OP 36.4 14.3 13.1 11.2 1.5 1.4 1.3 4.2 10.1 10.0
Affin Holdings 2.83 3.03 MP 13.9 11.0 9.9 8.4 0.9 0.9 0.8 6.8 8.1 8.6
Hong Leong Bank 8.60 8.48 UP 16.5 15.1 15.2 1.5 2.5 2.2 2.0 16.7 14.8 13.4
AFG 2.80 3.27 OP 16.2 17.2 12.8 21.5 1.6 1.5 1.4 16.8 8.6 9.1
RHB Capital * 5.60 NR NR 11.5 10.0 9.6 7.8 1.5 1.4 1.3 13.3 12.3 13.0
Sector Wt. Avg. ^ 17.1 14.9 12.5 2.3 2.0 1.8 13.2 13.0 13.3
Sector Wt. Avg. (Ex-Maybank) 16.5 14.0 12.2 2.3 2.0 1.8 15.5 15.0 15.2
Sector Wt. Avg. (Ex-Maybank & PBB) 17.2 13.4 11.8 1.9 1.7 1.5 11.6 11.5 11.8
Source : RHB Research Institute, IBES Estimates
* Not under our coverage. IBES Estimates forecasts are used for companies not covered by RHB Research Institute.

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or
be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or
strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts
any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB
Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity
securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

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This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended
securities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

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