PBBANK: Buy the dip

May stage a technical rebound. PBBANK dipped to a two-month low of RM4.31 from its 52W high of RM4.84, as investors expressed concerns over a potential share price overhang following the Teh family’s plan to reduce their stake. Currently holding a 23.4% share in the bank through Teh Holdings, the family intends to gradually trim this down to 10%, offering shares to eligible staff, investors, and directors. Amid this share price dip, we see the current weakness as an attractive opportunity for investors to accumulate in anticipation of a rebound.

Looking at similar past exercises, other bank shares have shown swift recoveries in such events. For example, AMMB's share price rebounded within a month after ANZ’s stake sales (16.5% in March 2024 and 5.2% in May 2024 at a 3-8% discount). Likewise, the RHB disposal by Aabar (back in Aug-18, Mar-19, Jun-19, Dec-20, at 3- 5% discount for bite-sized blocks of 3-6%) took roughly 1-2 months to bounce back. More importantly, the Teh Family’s planned 13% stake disposal will be spread over a five-year period in a gradual manner, rather than in one lump sum.

Near support region. We expect PBBANK to find strong support at the RM4.20 level (near EMA50), with additional support in the RM4.05 (EMA100)-4.08 region. The oversold indicators, combined with these key support levels, suggest a potential rebound once PBBANK reaches these price points. Therefore, we advocate investors to accumulate within the RM4.05-4.20 range in anticipation of a rebound toward the RM4.37-4.52-4.65 region. Cut loss at RM3.94.

Collection range: RM4.05-4.18-4.20

Upside targets: RM4.37-4.52-4.65

Cut loss: RM3.94

Source: Hong Leong Investment Bank Research - 14 Oct 2024