On Friday, JPMorgan adjusted its outlook on Public Bank Bhd (PBK:MK) (OTC: PBLOF), moving its rating from Overweight to Neutral. Accompanying this change, the firm also revised the price target to MYR4.60 from the previous MYR5.00. The revision follows an announcement from Public Bank regarding the estate of its late founder, Teh Holdings, which plans to reduce its stake in the bank from 23.41% to 10% over the next five years.
The shares from Teh Holdings are expected to be sold to Public Bank employees, directors, and shareholders, potentially at a discounted rate. While the specifics of the transaction will be disclosed over time, the current market valuation of the 13.41% stake that is to be sold stands at approximately RM12 billion ($2.8 billion). The analyst noted that this substantial disposal, even though it will be spread over five years, is likely to create a significant overhang on the stock's price, which could constrain any immediate price appreciation.
The downgrade to Neutral reflects concerns that the planned stake sale might limit the stock's near-term potential. The new price target of MYR4.60, set for December 2025, is based on a two-stage dividend discount model (DDM), which is a reduction from the previous target of MYR5.00.
In addition to the stake sale news, Public Bank has also made an acquisition, purchasing a 44.15% stake in LPI Capital. However, the analyst remarked that this move is only a minor positive and is not expected to have a significant effect on the bank's earnings. The transaction details and potential impacts will become clearer as more information is released in the future.
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