After the valuation fell by 30%, J.P. Morgan Chase: it can take advantage of the low price to absorb Popular Bank

Moreover, Public Bank has also become one of the Malaysian stocks preferred and recommended by Xiaomo.

Analysts at J.P. Morgan Chase pointed out that in the past 5 years, in the face of investors' concerns about its lagging technology, insufficient growth momentum, and equity ownership issues left by the late founder Tan Sri Zheng Hongbiao, the valuation fell by about 30% during the period, to 11 times the estimated capital-to-profit ratio or 1.31 times the estimated stock price-to-book value ratio (P/B).

However, the analyst believes that Volkswagen Bank's performance prospects are stable, and future valuations are expected to rebound under favorable support such as a stable loan market share of about 17% and stable net interest earnings (NIM).

“Public Bank's domestic loan market share has stabilized at 17.5%. Among them, the market share of housing loans, car loans, and corporate loans is at high levels of 20.4%, 31%, and 32.3%, respectively. Coupled with an annual loan growth of around 6%, this impressive performance shows the bank's strong competitiveness in various core markets.”

At the same time, analysts said that the increase in total managed asset value (AUM) and revenue of the Volkswagen Trust Fund business, as well as growth in low-risk areas such as mortgages, foreign cars, and small and medium-sized enterprise (SME) loans, will also drive the future growth of Volkswagen Bank.

“We estimate that this momentum will be reflected in Volkswagen Bank's compound annual net profit growth rate (CAGR) of 5% and dividend CAGR of 10% between 2023 and 2026.”

In response, the analyst revised Public Bank's rating from “neutral” to “increase holdings,” while the target price was raised from RM3.90 to RM4.50.

“According to our forecast, the weekly interest rate of Public Bank in 2024 and 2025 will be 5.4% and 5.7%, respectively. In contrast, the yield on 10-year Malaysian bonds is only 3.8%.”

On the other hand, the analyst pointed out that it is still unclear. The government will decide how to dispose of the 23% shares left over by Zheng Hongbiao. There is an investment risk, but regardless of the outcome, Public Bank's operating strategy is likely not affected.

“The culture and market position of Volkswagen Bank is almost unique in the country, so we believe that regardless of the official decision, the bank's business strategy is largely unaffected and is the most reasonable guess.”

According to current regulations, no individual can hold more than 10% of the shares in a bank.