Maybank- a good long-term BUY

Over the last 4 days, the US' Philadelphia Banking Index ('BKX') has rebounded off its low of just under 18 recorded on March 6th to lose at 26 yesterday. The rebound was due to favorable comments from Citibank & Bank of America that they made profit in the first two months of this year (see Chart 1 & 2 below).


Chart 1: BJX's 5-min chart as at March 12, 2009 (Source: Marketwatch.com)


Chart 2: BJX's daily chart as at March 12, 2009 (Source: Stockcharts.com)

In our local market, banking stocks were heavily sold down over the past two weeks due to the selldown of banking stocks worldwide as well as poor sentiment brought on by the sharp fall in the share price of Maybank. As mentioned earlier, Maybank is undertaking a rights issue of 9-for-20 at RM2.74 per share in order to raise its share capital after its recent overseas acquisition. Since the announcement of the rights issue, Maybank's share price has dropped about RM1.20 (from RM5.20 to yesterday's close of RM4.06). See Chart 3 below.


Chart 3: Maybank's daily chart as at March 12, 2009 (Source: Tradesignum.com)

I believe that a long-term investor will find Maybank to be a very attractive buy. Moment like this only come once in a long while. The last time, Maybank has a sharp fall was during the Asian Financial Crisis. Then, Maybank's share price dropped from a high of RM8.00 in February 1997 to a low of RM1.50 in August 1998- a drop of RM6.50 or 81%. Since its recent high of RM10.60 in January 2008, Maybank has lost about RM6.50 or 61% of its value. Why?

There are two main reasons for the fall; firstly, the global financial crisis & the ensuing global equity meltdown and secondly, Maybank's untimely overseas acquisitions of about RM12 billion. If the same acquisitions were made 6 months later, Maybank would have gotten a better deal (maybe, 20% cheaper). If it was made a year before, the same might apply. In both instances, Maybank may be viewed less harshly as it is now. I think Maybank is being unfairly punished by the untimely investments. Maybank offers investor great value at the present moment (like buying a Mercedes at the price of a Toyota). When sentiment improves-- and it always will-- Maybank's share price will surely reward us handsomely. You only have to look at the price appreciation from RM1.50 in August 1998 to RM9.65 in January 2000- a gain of RM8.15 or 543%!!! Take a good look at Chart 4 & 5 below.


Chart 4: Maybank's monthly chart as at March 12, 2009 (Source: Quickcharts)


Chart 5: Maybank's daily chart for 1997-8 & 2008-9 (Source: Tradesignum.com)

I believe a good approach is to accumulate Maybank slowly at the present market price. There is a good likelihood that the price may go lower. I do not think it will go much lower than RM3.50. Good luck.