Results

4QFY13 net profit of RM406.4m (+3.2% qoq; +24.9% yoy) took FY13 to RM1,635.1m (+10.2% yoy) or 98.6% and 98.4% of HLIB and consensus forecasts, respectively.

Deviations

Largely in line.

Dividend

Final single-tier dividend of 15 sen (vs. 13.5 sen), making total for the year at 22 sen (vs. 20.1 sen) or payout of 40.6% (lower end of its 40-50% KPI), in line with our projection of 22 sen (40% payout).

Highlights

Although FY13 earnings were dragged by investment and markets, overall results shows that the company continued to reap success in executing its strategy of focusing on profitable growth while strengthen customer centricity, increase efficiency as well as optimizing funding structure and capital.

FY14 KPIs set at net profit growth of 10-12%, ROE of 14- 14.5%, CIR ≤46%, gross impaired ratio ≤2% and 40-50% dividend payout. FY15-16 KPIs suggest some acceleration in earnings growth. Please see next page for more details of the KPIs/guidance. HLIB’s forecasts are at the lower end of its KPI ranges.

Merger synergy with Kurnia and MBF Card is expected to gain traction in FY14. By FY15, with most synergistic benefit cost tapering off (tail-end), the impact on earnings will be more apparent. Guidance suggests (Figure 1), benefits of circa 4% of HLIB’s FY15 PBT forecast.

Asset quality continued to improve.

Capital ratios remain comfortable under Basel III.

In final due diligent on Hwang-DBS. Next step is pricing. While aim is to gain market share and higher economies of scale in fund management and brokerage, management highlighted the importance of right valuation. We continue to expect pricing range of 1-1.4x given potential attrition and duplication in clients.

Risks

Unexpected jump in impaired loans, lower than expected loan growth and impact from lower capital markets activities.

Forecasts

Fine-tuned post FY13 results with FY14 -1.8% but FY15 +0.2% as well as introduced FY16 forecast.

Rating

HOLD

• Positives – Value propositions from ANZ have improved asset quality, risk management and competitiveness. Improving ROE and higher dividend guidance as well as focus on profitable growth are bearing fruits.
• Negatives – High LD ratio and relatively high earnings sensitivity to capital markets.

Valuation

• Maintain Hold but target price fine-tuned to RM7.32 (from RM7.36) post results adjustment, based on Gordon Growth (ROE of 14.3% and WACC of 11%).

Source: Hong Leong Investment Bank Research - 17 May 2013