Thursday, May 19, 2011

AMMB Holdings Delivering Profitable Growth & Dividend

19 May 2011
Price Target: RM7.71
Share price: RM6.44


Results
4QFY11 net profit of RM316.3m (-2.8%% qoq; +30.9% yoy) took FY11 to RM1,342.8m (+33.1% yoy), in line with HLIB and consensus (102.8% and 99.5% of full year forecasts respectively).

Deviations
Largely in line.

Dividend
Final single tier dividend of 12 sen. Management indicated that there is no intention to designate the dividend under DRP given that it has robust capital ratios. Total full year single tier dividend of 18 sen is slightly higher than HLIB’s projection of 17 sen.

Highlights
# Despite weaker quarter-on-quarter performance (mainly due to impairment loss on financial investment vs. gain and lower investment and trading income), overall FY11 earnings growth was commendable. This was mainly driven by continued loans growth in profitable segments (mainly business and corporate), strong growth in non-interest income and lower provisions. Low single digit growth in overheads also helped.

# FY12-14 KPIs – net profit CAGR of 14-16% and ROE of 14-16% vs. HLIB’s projection of 12% and 14.1-14.5% respectively. This gives room for surprises.

# Continued rebalancing of loans mix has resulted in a small positive assets-liabilities gap. Thus, when compared with FY08 negative assets-liabilities gap, the group is now able to benefit slightly from rising interest rate rather than having a negative impact.

# Asset quality continued to improve with LLC now over 100% for the first time. The trend is expected to continue.

# Thus, credit charge is expected to trend lower to the 50bps mark over the longer term vs. 68bps in FY11.

Risks
Unexpected jump in impaired loans, lower than expected loan growth and impact from Basel III on capital.

Forecasts
FY12-13 raised by 3-4.4% following final results and introduced new FY14 forecast.

Rating
BUY (TP: RM7.71)


Positives:
Value propositions from ANZ have improved asset quality, risk management and competitiveness. Improving profitability and higher dividend guidance as well as focus on profitable growth is bearing fruits.

Negatives:
impact on interest income from rising interest rate albeit marginal.

Valuation
Target price raised from RM7.23 to RM7.71 (following our earnings revision) based on Gordon Growth (ROE of 14.2% and WACC of 9.5%).

Source: HLeBroking

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