Rattled by an unexpected and unprecedented RM2.83bn global settlement with MoF on 26 Feb with regards to AMMB’s previous alleged involvement in 1MDB transactions, we expect the stock to slide further towards RM2.80 (0.47x FY22 P/B vs 5Y mean 0.5x/sector’s average 0.9x) and RM2.63 (rounding top breakdown target; 0.44x FY22 P/B vs 5Y mean 0.5x/sector’s average 0.9x). At RM2.63-2.80 levels, AMBANK provides an attractive risk/reward ratio for bargain hunting amid undemanding valuations and would have discounted the credibility concerns of the one-off settlement, supported by the resumption of earnings growth and dividend payment from -RM1.67bn in FY21 (nil dividend) to RM1.23bn in FY22 (DPS: 12sen) and RM1.35bn in FY23 (DPS: 13sen). All in all, 1MDB is a legacy issue, and we believe AMMB is capable of weathering the storm and be successful again in rolling out long-term business strategies, rebuilding its image, and eventually shake off any negative perception.

Good bargain hunting activities near RM2.63-2.80 levels. After rebounding from RM2.80 (2 Nov low) to a 52-week high of RM3.79 (14 Dec), AMBANK share prices have formed a series of lower highs before ending at RM3.16 last Friday. Unless staging a strong recovery above RM3.21 neckline and RM3.36 (downtrend line from RM3.79), the stock is firmly on the downtrend following the RM2.83bn global 1MDB settlement with MoF, potentially revisiting the RM2.90 (lower downtrend channel) and RM2.80 zones. Failure to hold at these levels will trigger further selldown towards RM2.63 (rounding top target). On the flip side, a successful breakout above the congested RM3.21-3.36 resistances will encourage further recovery towards RM3.47 (R3) territory.

Source: Hong Leong Investment Bank Research - 3 Mar 2021