SECTOR UPDATE
Banking (OVERWEIGHT↔). Feb 2023 Statistics: Buoyant Readings. February 2023 system loans growth registered a 5.2% YoY growth, within our 4.0%-4.5% target for now in anticipation of possible easing in the latter half as pending inflationary pressures may drag overall activity. That said, immediate-term numbers could stay lofty, spurred by upcoming seasonality factors and higher primary market home purchases. Gross impaired loans (GIL) continue to linger at manageable rates (1.76%) with banks still holding on to sizeable provisions to cushion unexpected blows (loan loss coverage: 95.8%). Meanwhile, deposits may show persisting favour towards higher-yielding termed deposit products from the ongoing price competition as banks compete to lock in cheaper funding costs. Given the current optics, we believe BNM could keep OPR stable at 2.75% for the rest of the year, in line with their “conditional pause” as macro uncertainties remain. We maintain our OVERWEIGHT call on the sector with top picks being names with highly conservative fundamentals. In the wake of global banking meltdowns, investors may demand stronger safety nets from banks to consider them investible. With that, we recommend: (i) PBBANK (OP; TP: RM4.90) for its leading GIL ratio supported by highly collateralised books, and (ii) RHBBANK (OP; TP: RM7.10) for their leading CET-1 ratios in addition to now substantially more attractive dividend prospects (7%-8% yield).
COMPANY UPDATE
MYNEWS (UP↔; TP: RM0.41↓). Scaling Down Store Expansion. MYNEWS has scaled down its expansion plan as it intends to “focus more on product quality and expanding its SKUs”. We believe, it could have also considered the intensifying competition in the industry which is getting crowded with more players vying for customers. Hence, we cut FY23-24F net profit by 26% and 17%, respectively, reduce our TP by 18% to RM0.41 (from RM0.50) and maintain our UNDERPERFORM call.
- KENANGA
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