Our target price of RM3.4 is based on PB ROE methodology, assuming FY25E DPS of RM0.21 (based on ~45% dividend payout), cost-of-equity of 10.8%, and a 5% long-term growth rate. Our valuation methodology also considers sustainable earnings, dividend growth, and excess returns relative to cost of equity, which factors in the liquidity/sentiment impact on valuations. Our fair value implies a FY24/25E P/B of 0.88x vs. 9.8% forecast ROE (historic 1SD cycle ranges: 9.1x-13.5x P/E [Mean 11.3x], 0.93x-1.61x P/B [Mean 1.27x]).

Key upside/downside risks to our target price includes: 1) macro outlook, government fiscal and central bank monetary policy measures impacting loan growth and MYR exchange rates; 2) NIMs, which depends on overnight policy rates (OPR) and CASA deposit growth in Malaysia; 3) ability to broaden and deepen the fee/ non-II base; 4) asset quality outlook and ability to maintain low credit costs; 5) ability to maintain cost discipline in line with revenue growth; 6) dividend policy/capital management; and 7) event catalysts such as M&A, divestments, both overseas and domestically, as well as significant management or ownership changes. Any of these factors could cause the shares to deviate from our target price.