KEY INVESTMENT HIGHLIGHTS

• 6MFY24's Core NP of RM229m was Within/Within our/street forecasts: 46%/47% of full-year forecasts
• Management's tone: Neutral
• Core themes: (a) Further NIM compression, (b) Downward revision of FY24 targets expected, (c) Asset quality fears push Affin to reprioritise consumer loan segment
• Forecasts unchanged
• Maintain SELL | Unchanged TP of RM1.82 | based on an unchanged FY25F P/BV of 0.35x

Verdict: Affin's current share price remains overpriced for its fundamental outlook - even factoring in the Sarawak factor.

Yays

1. More moderate loan growth as of late is better for its liquidity profile.
2. Lots of opportunities from the deal with potential new shareholder.
3. NOII gradually coming online.

Nays

1. Possibility of further dividend disappointments.
2. OPEX and CIR are still seemingly uncontrollable.
3. NIM compression is likely to persist.
4. Questionable asset quality, though NCC outlook is more positive.

OKs

1. CASA flows are picking up - but its high rates would barely bring any benefit to COF.
2. Affin's share price could go either way.

Results in a nutshell:

▼ 6MFY24's Core net profit (NP) of RM229m down by -13%yoy.

Largely dragged by a sharp increase in OPEX and weaker NII and Associate results. There were notable improvements in NOII and provisions.

▲ 2QFY24's Core NP of RM119m up by +8%qoq. Driven by better NOII, NII and OPEX.

▲ Gross loans grew by +1.4%qoq, coming up to +3.5%YTD.

▼ Deposits grew by -0.7%qoq, coming up to +0.6%YTD.

▲ GIL moved by -6bps to 1.89%, LLC currently at 97%.

Source: MIDF Research - 26 Aug 2024