Journey to Wealth
Affin Holdings Berhad - FY12 marginally above expectations
Period 4Q12/FY12
Actual vs. Expectations The FY12 PAT of RM628.9m was marginally above the consensus forecast (107%) and that of ours (105%) due to an allowance write-back.
Dividends No dividend was proposed.
Key Result Highlights The 4Q12 net interest income was flat with a marginal increase of 1.9% QoQ and +4.0% YoY, supported by the positive growth in gross loans of 3.1% QoQ. Its 11.7% YoY loan growth was slightly better than our forecast of 10%. Meanwhile, the total deposits rose by 1.9% QoQ (2.8% YoY). The estimated NIM was higher by 2bps to 1.79% in 4Q12 from 1.77% in 3Q12 on a reasonable leverage with the L/D ratio at 79.6%.
The 4Q12 non-interest income of RM156.2m was softer after a strong performance in the 3Q, declining 6.8% and 14.1% QoQ and YoY respectively. On a whole, total revenue came in encouragingly at RM388.6m (-1.8% QoQ).
The write-back of RM10.1m was in line with the decline in the gross impaired loans to RM790.4m (from 3Q12's RM818.7m) with the gross impaired ratio falling to 2.88% (from 2.43% in 3Q12).
Cost was higher with a cost-to-income ratio of 47.5% during the quarter (vs. 43.0% in 3Q12) due to the increase in staff cost.
The achieved full-year ROE of 10.8% was above our previous expectation of 10.0%.
Outlook With the share price trading below its book value, we believe that AFFIN's potentially higher credit risks have already been priced in by the existing discount in its valuation and hence, there is room for its trading multiple to improve with its M&A news.
Change to Forecasts There are no changes in our earnings estimates.
Rating Maintain OUTPERFORM
With the strong result performance, its current valuation at 0.8x FY13 P/BV with an estimated ROE of 10.3% is undemanding in our view and offers a favourable risk-to-reward proposition.
Valuation We are maintaining our TP of RM4.40, which is based on a targeted 1.0x FY13 BV.
Risks Tighter lending rules and a margin squeeze.
Source: Kenanga
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