Alliance Research House stated that there could be factors that could dampen the outlook for Public Bank.
Alliance's banking sector analyst Cheah King Yoong stated that there were three main macro factors which could hinder Public Bank's outlook in the medium to longer term.
These included the growth rate of property loans which had likely peaked in 2011; the bank not expecting to directly benefit from the Economic Transformation Programme-related business loans compared with its peers; and an internal factor in the succession of its management could also serve as a de-rating catalyst for the stock.
“Public Bank reported flattish market shares in its hire purchase and property financing segments on a quarter-on-quarter basis. This shows that the group is struggling to expand the market share of its core loan segments,” Cheah wrote in his report.
“Since we anticipate the growth rate of property loans to peak in 2011, the bank with high exposure to property lending is expected to be adversely impacted by the slowdown in this particular loan segment,” he added, rating the stock a “sell” with a target price of RM12.30 based on a 10% discount of its Gordon Growth Model valuation which is an implied 2.8 times FY12 forecast price to book ratio.
Public Bank could also face a succession in the leadership of its management. Its chairman and founder, Tan Sri Teh Hong Piow, who at present is still a very hands-on manager heading the bank, will turn 81 this year.
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