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Affin Holding Berhad - OUTPERFORM - 28 May 2012

kiasutrader
Publish date: Mon, 28 May 2012, 05:06 PM

Period   1Q12

Actual vs.  Expectations
1Q12 PAT of RM166m was above the consensus' forecast (31%) and that of ours (31%). 

Dividends  No dividend was declared.

Key Result Highlights
The 1Q12 net interest income declined marginally by 1.7% QoQ despite seeing a positive growth in gross loans by 2.2% QoQ. Meanwhile total deposits raised by 2.8% QoQ. The NIM declined 5bps to 1.87% in 1Q12 (4Q11: 1.82%). 

1Q12 non-interest income of RM219.8m was marginally positive with both QoQ and YoY growth rates registered at +3.8% and +11.3%, respectively. As such, the total revenue was uninspiring at RM361.9m (+0.4% QoQ).  The key surprise during the quarter was the write-backs of RM13.8m.  

However, gross impaired loans rose to RM911m and the gross impaired ratio was higher at 2.87% (from 2.84% in 4Q11). Loan loss coverage was at 68.5% and as such, we believe such a writeback would not be sustainable.

Cost was contained at a cost-to-income ratio of 47% during the quarter.  The achieved ROE of 11.8% was above our expectation.

Outlook  We maintain our conservative 4%-5% earnings growth forecasts for FY12-13, driven by loan growth of 10%, a falling cost-to-income ratio at 46% (from 48% in FY11), a lower credit cost ratio assumption at 23bps and stable NIMs.

However, we see the higher write-back in the current quarter as not sustainable as impaired loans were rising during the quarter with a lower loan loss coverage. We still believe that our FY12E  ROE  of  9%  is  reasonable  due  to  the bank's conservative growth strategy over the past few years (loan growth averaged 10% p.a. in FY08-12). 

Change to Forecasts
We are maintaining our FY12E PAT of RM528.5m and FY13E of RM554.9m.

Rating  MAINTAIN  OUTPERFORM

We reiterate our OUTPERFORM recommendation.  In our view, AFFIN presents a good but underappreciated investment proposition. We see room for further expansion in its valuation multiples in the coming years.

Valuation   Our TP of RM4.30 is based on a targeted 1.0x its FY2013 BV.

Risks  Tighter lending rules and a margin squeeze.  

Source: Kenanga
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