RHB Capital Berhad ('RHBCap') is an investment holding company. It is involved in commercial banking, Islamic banking, investment banking, leasing, offshore banking, offshore trust services, general insurance, unit trust management, asset management, and nominee and custodian services. All these activities are carried on via RHB Banking Group, which is the fourth largest fully integrated financial services group in Malaysia.
Recent Financial Results
RHBCap has just announced its results for 2Q2009 ended 30/6/2009. Its net profit increased by 31.9% q-o-q or 11.2% y-o-y to RM302 million while its turnover dropped by 1.2% q-o-q or 10.8% y-o-y to RM1.34 billion.
Higher sequential pre-tax profit was attributed to increase in net interest income (of RM20.8 mil), Islamic Banking income (of RM40.8 mil), Other Operating Income (of RM19.1 mil); and drop in Other Operating Expenses (of RM40.1 mil) which offset the higher allowances on loan losses (of RM17.4 mil) & reversal of impairment losses (of RM18.3 mil).
Turnover, which consists of Interest Income, Other Operating Income & Islamic Banking Income, has been declining in the past 2 quarters due to lower interest rate charged.
Table 1: RHBCap's 8 quarterly results
Chart 1: RHBCap's 8 quarterly results
Valuation
RHBCap (closed at RM4.60 yesterday) is now trading at a trailing PE of 9.2 times (based on last 4 quarters' EPS of 50 sen) or at a Price to Book of 1.2 times (based on NTA per share of RM3.74).
This compared favorably to Public Bank which is trading at a trailing PE of 14.1 times (yesterday's price of RM9.89 & annualized EPS of 70 sen) or Commerce which trades at a trailing PE of 15.0 times (yesterday's price of RM10.34 & annualized EPS of 69 sen). If we valued RHBCap at a 10%-discount to Public Bank & Commerce's PE multiple, then its fair value could be RM6.50.
Technical Outlook
RHBCap has broken above its medium-term downtrend in July (see Chart 2). A short-term uptrend line has also formed, with support at RM4.45-50 (see Chart 3). Its next resistance ia at RM4.90-5.00 & thereafter at RM5.50.
Chart 2: RHBCap's weekly chart as at Aug 24, 2009 (Source: Quickcharts)
Chart 3: RHBCap's daily chart as at Aug 24, 2009 (Source: Quickcharts)
Conclusion
Based on improving performance, attractive valuation & good technical outlook, I think RHBCap is a good stock for long-term investing.
Dear Mr. Alex,
ReplyDeleteApart from RHB Cap having good long term potential for apperciation, what about AMMB?
Apperciate your comments on this counter.
Thank you,
Jonathan
Hi JR,
ReplyDeleteAMMB's EPS for FY2009 ended 31/3/2009 was 31.6 sen. AMMB is valued at RM4.27 based on a PE of 13.5 times (i.e. at a 10% discount to PBB & Commerz's PE of 15 times). As such, AMMB's upside is limited since it closed at RM4.08 on Sep 2.
AMMB rose from a low of RMl.83 in Oct 2008 to RM4.38 in Aug 2009- making it the best performing banking stock todate. After such a strong run, the stock may be due for some correction. A good entry will be at the immediate uptrend line support of RM3.80-90.
Dear Mr. Alex,
ReplyDeleteThanks for your feedback. The reason for asking is most of the banks have run up ie PBB & Commerce.Looking for banking stock with capital growth and consistent dividends.
Best Regards
Jonathan.