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Affin IB Research forecasts mediocre net earnings for AMMB for FY03/14E-16E

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Affin IB Research forecasts mediocre net earnings for AMMB for FY03/14E-16E Empty Affin IB Research forecasts mediocre net earnings for AMMB for FY03/14E-16E

Post by Cals Thu 26 Dec 2013, 09:10

Affin IB Research forecasts mediocre net earnings for AMMB for FY03/14E-16E
Business & Markets 2013
Written by theedgemalaysia.com   
Thursday, 26 December 2013 08:25

KUALA LUMPUR (Dec 26): Affin IB Research has maintained its Reduce rating on AMMB Holdings Bhd at RM7.34 with an unchanged target price of RM7.20 and said it forecast a mediocre CAGR of 10% in net earnings for AMMB for FY03/14E-16E due to the management’s more selective lending to the retail segment and economic sector, while simultaneously affected by a potential slowdown in industry-wide loans growth.

In a note Thursday, the research house said its target price of RM7.20 was equivalent to a P/BV multiple of 1.53x, premised on a CY14 ROE of 14.4%, cost of equity of 11.8% and a growth rate of 5%.

“At this juncture, AMMB’s valuation appears lofty as the stock is trading at a P/BV of 1.6x CY14, well ahead of its 6-year P/BV average of 1.4x and the sector’s average of 1.5x for CY14.

“Meanwhile, NIMs are expected to trend lower by another 10bps in FY03/14 to 2.49% arising from depletion in the higher-yielding portfolio and the focus to boost deposit growth. Key re-rating catalysts include: - i) Increased cross-selling activities; and ii) implementation of AmHorizon (in November 2013), a new core banking system,” it said.
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