PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 20 Feb 2020, 9:10 AM


AMMB Holdings Berhad - Disposal of Non-Performing Loans

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The Group has announced the proposed disposal of non-performing loans and financing worth an aggregated RM553.9m in a related party transaction. While financial benefits cannot be ascertained at this juncture, the move is nevertheless a positive one as the cash infusion into the Group for working capital purposes will further augment medium to long-term growth. We keep our forecasts unchanged at this juncture pending further clarity. We continue to like the Group for its earnings growth recovery though we keep our Trading Buy call pending further sustainability. Our target price is raised to RM4.50 (RM4.20 previously) as we make minor tweaks to long-term growth assumptions.

  • Sellers of the non-performing loans are AmBank and AmBank Islamic, amounting to RM428.1m and RM125.8m respectively, consisting of 537,068 individual and corporate accounts across various product lines (industrial hire purchase, small and medium industry loans, auto financing, mortgage, personal loan, credit cards).
  • Buyers meanwhile, are special purpose vehicles established and wholly-owned by the Aiqon Capital Group for the purpose of this transaction. Aiqon Capital’s core business is the acquisition and management of non-performing loan assets from banks and financial institutions, and is recognized as a key player in the Asia Pacific region. To-date, the Group has acquired in excess of RM43bn, in face value, of non-performing assets in Malaysia, Singapore, Philippines, Thailand, Australia and Spain. The Executive Chairman/CEO and major shareholder of Aiqon is a related party to a major shareholder and director of AMMB, thus this transaction being deemed as related.
  • The proposed disposal will have a positive impact on the financial results of the Group upon completion of the transaction expected by March 2019, though actual quantum cannot be quantified at this juncture pending settlement and adjustments as per agreed-upon mechanisms. The Group is also unable to definitively determine the date and original cost of investment of the sale portfolio as they comprise accounts that have been written off over the years, while some others may have been acquired from other financial institutions to which no specific value was ascribed. Suffice to say however, there will be gains recorded. We keep our earnings estimates unchanged pending clarity.

Source: PublicInvest Research - 4 Jan 2019

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