Investment Highlights

• We maintain our BUY recommendation on Alliance Bank Malaysia Bhd (ABMB) with an unchanged fair value of RM2.95/share. Our fair value is based on FY22 ROE of 8.2% leading to a P/BV of 0.7x. We make no changes to our earnings estimates. We have assigned a 3-star ESG rating on the company (Exhibit 1).

• The amount of targeted assistance granted to borrowers has risen to slightly above RM7bil vs. RM6.3bil in 3Q21. On a comforting note, the increase in the amount was lower compared to that seen in 3Q21. This implied that applications by borrowers requesting for relief assistance have tapered. A continuation of this trend ahead could see lower provisions in the form of management overlays.

• Loans that were granted moratorium have risen to circa RM1.5bil from RM1.1bil in 3Q21 while that for payment relief assistance (PRA) to the consumer, SME, commercial and corporate loan borrowers was RM5.6bil vs. 3Q21’s RM5.2bil.

• Loans under moratorium and PRA accounted for 20.0% and 80.0% respectively of the total targeted assistance of around RM7bil. The mix of loans by type of borrowers (in %) for moratorium and PRA has not changed much since the last results briefing; it still comprises predominantly consumer loans. The group is seen to be conservative, treating loans under PRA as under stage 2 with provisions raised as management overlays.

• On a positive note, the asset quality for SME, commercial and corporate loans has been holding up.

• 4Q21 is likely to see a slight improvement QoQ in NIM from the reprising of deposits. No surprises expected on the group’s interest margin, which will probably end FY21 around 2.35% vs. 2.40% in FY20. This will be in line with the guidance of 5 to 10bps compression given earlier.

• Dividends are likely to be declared in 4Q21 with the improvement in visibility of earnings and its asset quality. After the automatic moratorium ended in Sep 2020, a high percentage of borrowers has resumed repayments. Nevertheless, the dividend payout is anticipated to be lower in FY21 than the prior year.

Source: AmInvest Research - 28 Apr 2021