KUALA LUMPUR (Jan 13): RHB Research Institute Sdn Bhd said Public Bank Bhd shares may "continue to command premium valuations" due to the bank's 'strong' fundamentals and immaterial exposure to ringgit weakness and higher bond yields.

In a note today, RHB analyst Fiona Leong said Public Bank had RM800 million worth of held-for-trading (HFT) investment securities at end September 2016.

“The recent spike in bond yields would likely result in some MTN (mark-to-market) losses from the bank’s HFT investment securities. But the losses would not be material, given its small HFT portfolio of RM800 million at end September 2016.

"In our view, Public Bank is the stock to own for exposure to Malaysia’s banking sector in current challenging times. We believe the bank would not be adversely impacted by the recent spike in bond yields or the MYR weakness, Leong said.
 
She maintained RHB's target price (TP) for Public Bank Bhd shares at RM22, with an unchanged buy” call. Leong said the TP was based on Public Bank's 2017 estimated price-to-book value ratio of 2.3 times, versus the 3.1 times 10-year average.

At 11:19am, Public Bank shares rose two sen or 0.1% to RM20.08, for a market capitalisation of RM77.46 billion. The stock saw some two million shares traded.