Maybank limited – A Safe Dividend Blue Chip Stock?

Bursa-listed Malayan Banking Berhad (BURSA: 4707), also known as “Maybank”, is one of Malaysia’s leading big banks and ranked 1st as Malaysia's most valuable bank brand according to the Brand Finance report.

  • Maybank serves 22 million customers across 20 countries
  • Net profit margins are relatively stable at 19% to 24% but sliding slightly over the past decade
  • Price/NAV now stands at an all-time low of 1.28x over the past years
  • Dividends have increased in tandem with growing profits over the last decade
  • Maybank has a solid financial position which exceeds the regulatory requirements
  • The analyst consensus gives a mean target price at MYR9.85, representing around 10% upside.

Company Background

Malayan Banking Bhd is a financial-services group with a mostly regional presence in the Association of Southeast Asian Nations. Maybank provides a comprehensive range of financial services under 3 key reporting segments, including community financial services, global banking, and insurance.

A large part of its profit activities is derived from consumer, corporate, investment, transaction, retail, and business banking for mostly small and midsize enterprises. Much of Maybank’s business model is leveraged to distribute banking products to its key target market of Islamic clients.

Today, it serves 22 million customers with an international network of over 2,200 branches in 20 countries.

Financial Highlights

As of 12Jul2019 | Sourced from ShareInvestor’s WebPro

Utilizing ShareInvestor’s WebPro, we can get a quick glance into the historical financials of Maybank. Its net profit margins are relatively stable at 19% to 24% but sliding slightly over the past decade.

That said, its revenue has grown steadily over the past decade from MYR16.7 billion in FY2010 to MYR39.04 billion in FY2018. Profit attributable to shareholders (green bar) also increased in line from MYR3.8 billion in FY2010 to MYR8.05 billion in FY2018.

As of 12Jul2019 | Sourced from ShareInvestor’s WebPro

Another plus point is that its Price/NAV now stands at an all-time low of 1.28x over the past years. Maybank also managed to achieve a decent Return on Equity (ROE) of 10.3% although it has also declined in the same period.

For some perspective, we did a quick comparison with DBS and OCBC. Maybank’s P/NAV and ROE comes in pretty snug with the other 2 Singapore banks although its ROE is the lowest among the 3 of them.

Maybank’s Dividend Analysis

As of 12Jul2019 | Sourced from ShareInvestor’s WebPro

Next up, we dive into the dividend analysis of Maybank. From the chart above, we can see that the company has been very prudent and consistent in their payout ratio where it has been managed between 0.7x to 0.8x.

Dividends per share have also increased in tandem with the higher profits albeit at a slower pace, up around 8.6% from 52.5 sens in FY2012 to 57 sens in FY2018.

As of 12Jul2019 | Sourced from ShareInvestor’s WebPro

Last but not least, we can check out the specific record and payable dates for the dividend payments. From the above dividend payout chart, we noticed that Maybank usually records its dividends in Jun and Dec.

Income investors will also be thrilled to see that the dividend yield has been maintained above 5.5% over the past years.

As a rule of thumb, we will also need to look at a Bank’s capital position to ensure that it is not following the ‘Lehman Brothers’ footsteps.

As of 12July2019 | Sourced from Maybank’s Financial Results 1Q FY2019

Based on Maybank’s 1st quarter 2019 financial results, the bank is in a solid financial position. It has a total capital ratio of 19.0% and CET1 ratio of 14.55%, far exceeding the regulatory requirements as stated above on the right.

Analyst Consensus Estimates

As of 12Jul2019 | Sourced from ShareInvestor’s WebPro

Employing the Analyst Consensus Tool, we can see that a good 19 analysts have covered Maybank and the average consensus recommendation comes up to be “Overweight”.

Their mean target price is MYR 9.847, which translates to a 10.1% upside based on its share price of MYR 8.93 at the time of writing.

As of 12Jul2019 | Sourced from ShareInvestor’s WebPro

Lastly, analyst coverage of Maybank is pretty stable too, bouncing between 19 ratings to 22 ratings over the past 2 years from Jul 2017 to Jul 2019.

That said, we should watch out for a drop in the target price (denoted by the brown line) and the red-color Sell ratings which seems to become more prevalent since July 2018.

Happy investing!

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