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The MOST UNDERVALUED Malaysian bank could be UNLOCKING more than RM1BIL from its CROWN JEWEL [$$bill]

Publish date: Fri, 04 Dec 2020, 03:50 PM

The most undervalued Malaysian bank could be unlocking more than RM1bil from its crown jewel



Affin Bank (5185) is looking to list its 63%-owned Affin Hwang Asset Management Bhd (AHAM), according to recent news. Affin Bank is said to be currently working with advisers on the listing.


This unlocking of value could be a near-term catalyst for Affin Bank (the most undervalued Malaysian bank, trading at about 0.3x P/BV).


The value to be unlocked will be the current value of AHAM minus the price that Affin Bank paid for it. 


Affin Bank purchased AHAM for RM282mil in 2014.


What could be the current value of AHAM?


Asset management companies are generally valued at market cap to asset under management (AUM), better known as price-to-AUM (P/AUM).


So, one way to gauge the value of AHAM is to look at its AUM, which is currently about RM67bil (as at 31 Oct 2020).


Let’s gauge…


If AHAM is valued at 4% of its RM67bil AUM, it could have a value of RM2.68bil. Affin Bank’s 63% stake would then be worth about RM1.69bil. Affin Bank would then be unlocking RM1.41bil (RM1.69bil value minus RM282mil cost), which is equivalent to 68 sen per share or 41% of its share price/market cap.


Affin Bank's current share price and market cap is RM1.64 and RM3.41bil respectively.


In Jan 2018, CIMB Group divested some of its stake in CIMB-Principal Asset Management and CIMB-Principal Islamic Asset Management at a valuation of about 4% of AUM.


Value Partners Group Ltd (0806 HK), a Hong Kong-listed asset management group is trading at a market cap of US$981mil vs. its AUM of US$11.6bil (as of 30 Sep 2020), or 8.5% of its AUM.


Value Partners was co-founded by Penang-born Cheah Cheng Hye, known as the “Warren Buffett of Asia" and who also ranks #30 on Forbes Malaysia's 50 Richest 2020 list.


AHAM has their own version of Cheah Cheng Hye. That person is Teng Chee Wai, the founder of AHAM, who has grown the company's AUM from RM20mil in 2001 to over RM67bil today.


Among Malaysian asset management companies, AHAM is famous for being the “crème de la crème” in the industry. Hence, I believe AHAM should be able to fetch a premium valuation.


Imagine if AHAM is valued at 8% of its AUM; the value that will be unlocked by Affin Bank would be RM3.1bil or 91% of its market cap!



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Disclaimer: All information here reflects the author’s personal views/thoughts and should not be considered as investment advice. It is very important to do your own analysis before making any investment based on your own personal circumstances. No content here constitutes - or should be understood as constituting - a recommendation to enter in any securities transactions.







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