Affin IB Research maintains Reduce on AFG, target price RM4.78

Affin IB Research maintains Reduce on AFG, target price RM4.78
Business & Markets 2013
Written by theedgemalaysia.com
Wednesday, 07 August 2013 08:56

KUALA LUMPUR (Aug 7): Affin IB Research has maintained its Reduce rating on Alliance Financial Group Bhd (AFG) at RM5.38 with a target price of RM4.78 after AFG reported a 1QFY03/14 net profit of RM137.8 million (+10.6% y-o-y).

In a note Wednesday, the research house said that stripping-off non-recurring items, annualized net profit was in-line with its estimate for FY03/14 but below that of consensus by 6.6%.

Affin IB Research said the current quarter showed no major surprises, except for some one-off items - a RM30 million sign-on fee under a tie-up with Manulife and a one-off rationalization cost of RM24.8 million.

The research house said that in 1QFY03/14, the group's loan growth (+15.2% y-o-y) was ahead of the industry (June 2013 industry loan growth: +9.1% y-o-y).

“Nonetheless, NIMs compression was inevitable (down 10bps yoy to 2.3%) due to the rundown of higher-yielding loans and rise in funding cost. The group has proposed an interim single-tier dividend of 7.5 sen (net yield of 1.5%). 1QFY03/14 net profit grew by a robust 10.6% yoy on: 1) modest net-interest-income growth of 6.1%; and 2) a +52.8% yoy jump in non-interest income.

“Given AFG's lofty valuations P/BV of 1.8x FY03/14 and 1.7x FY03/15 vs. its historical average of 1.6x, we maintain our Reduce rating on AFG at our unchanged price target of RM4.78,” it said.