2023A NTA @ 6.4
2024F NTA @ 6.7
2025F NTA @ 6.9

Today MP @ 6.6

Is this a

i) Value trap

or

ii) Value grab?

NEXT 5 YEARS OUTLOOK NUMBERS

Retailers can use some basic mathematics to understand how management set the expectations on growth & payouts

i) ROE – widely used metric to indicate management efficiency. Let’s assume in the next business plan, a 10% sustainable, achievable target is set.

ii) EPS growth – Management to set. Let’s assume they look at 3 scenarios of high, medium, low growths.

iii) Dividend payout ratio – DPR is surprisingly a useful lever used to manage i) & ii)

We work out some calculations* below and notice the following EPS – DPR mapping:

EPS growth corresponding DPR
High 4.5% 55%
Med 3.5% 65%
Low 2.5% 75%

Calculations*:
DPR 55.00%
Target ROE BV EPS DV RE Implied EPS growth
10% 2024 7.20 72 40 32
10% 2025 7.52 75 41 34 4.5%
10% 2026 7.86 79 43 35 4.5%
10% 2027 8.22 82 45 37 4.5%
10% 2028 8.59 86 47 39 4.5%
10% 2029 8.97 90 49 40 4.5%
2030 9.38

DPR 65.00%
Target ROE BV EPS DV RE Implied EPS growth
10% 2024 7.20 72 47 25
10% 2025 7.45 75 48 26 3.5%
10% 2026 7.71 77 50 27 3.5%
10% 2027 7.98 80 52 28 3.5%
10% 2028 8.26 83 54 29 3.5%
10% 2029 8.55 86 56 30 3.5%
2030 8.85

DPR 75.00%
Target ROE BV EPS DV RE Implied EPS growth
10% 2024 7.20 72 54 18
10% 2025 7.38 74 55 18 2.5%
10% 2026 7.56 76 57 19 2.5%
10% 2027 7.75 78 58 19 2.5%
10% 2028 7.95 79 60 20 2.5%
10% 2029 8.15 81 61 20 2.5%
2030 8.35

PREDICTION: A 10% IMPROVEMENT IN DPS, THAT ALIGNS WITH THAT OF EPS, TO BE ANNOUNCED IN Q1 25’

Prediction is based on the following 3 OBSERVATIONS:

OBSERVATION 1. Employee SGS (share grant scheme) initiated in June 22’ source: (1)-(4)
Date Shares offered Vesting period
July 22’ 4.7 mil / (0.3 mil) July 25’
May 23’ 5.4 mil / (0.3 mil) June 26’
Mar 24’ 4.7 mil / (0.3 mil) June 27’
Jul 24’ 0.1 mil June 27’
(for ceo)

•With impending vesting dates, there’s incentive alignment to drive up prices sustainably in next few years.

OBSERVATION 2. In Aug 24’, Management indicated confidence in reaching > 10% ROE for FY2024. source: (5)

•This implies an EPS of > 0.70 for FY24, as recent quarters NAPS stood steadily above 7.0.
•With FY 23 EPS @ 0.65, the obvious target headline is to have 10% improvement in earnings, from 0.65 to 0.72+

OBSERVATION 3. Soon-ending of Together We Progress 2024 (‘TWP24’) corporate strategy. source: (5)-(6)

•A major milestone with completion of current strategy and unveiling of new strategy in Q1 25’

Sources:
(1)https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3461043
(2)https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3428075
(3)https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3353731
(4)https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3273812
(5)https://klse.i3investor.com/web/blog/detail/ceomorningbrief/2024-08-28-story-h-153233927-RHB_Bank_Confident_of_Achieving_Over_10_ROE_in_2024_as_Operating_Landsc
(6)https://disclosure.bursamalaysia.com/FileAccess/apbursaweb/download?id=229377&name=EA_FR_ATTACHMENTS

another dimension is to look at the broader underlyings:

i) earnings yield (inverse of PE ratio)

ii) real ROE ( ROE / PB ratio)

i) should reconcile with ii)

thirdly, the iii) dividend payout ratio %

dividend yield usually = iii) * i) or ii)