KEY INVESTMENT HIGHLIGHTS

• Purpose: Update on entrant of new largest shareholder
• Tone: Long term benefit still skewed toward the negative in the short-term on a fundamental basis
• Core themes: (a) Benefit from largest shareholder, (b) Fundamentals are still weak, and seems overvalued
• Forecasts unchanged
• Maintain SELL | Revised TP of RM2.35 | based on a revised FY25F P/BV of 0.45x (formerly 0.35x)

Verdict: Entrant of SAH is expected to be a positive boost for Affin in the long run. However, fundamental issues and overvaluation may beset in the short term

Yays

1. Entrant of Sarawak government via its wholly owned subsidiary company, SG Assetfin Holdings Sdn Bhd (SAH) with 31% stake - largest shareholder.
2. Lots of opportunities from the deal with potential new shareholder.

Nays

1. OPEX and CIR are still seemingly uncontrollable.
2. NIM compression is likely to persist.
3. 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. Re-rating adjustment due to new shareholders.

Entrant of a new largest shareholder. Sarawak Government via its wholly owned subsidiary company, SG Assetfin Holdings Sdn Bhd ('SAH') has concluded the share purchase agreement (SPA) of Affin Bank Bhd shares owned by Lembaga Tabung Angkatan Tentera (LTAT) and Boustead Holdings Berhad, thereby becoming the largest shareholder with an approximately 31% stake. Prior to the acquisition, the Sarawak Government held a 4.81% stake.

From a fundamental perspective, the potential new shareholder is in line with Affin's current direction. We think it provides Affin with increased Investment Banking (IB) opportunities (enhancing its NOII potential and filling in from the AHAM disposal). It also provides Affin opportunities to build up its SME and corporate segments, especially when the Group is looking to move away from lower-yielding consumer loan segments.

More of a longer-term play - important not to overstate the benefits brought about by these changes. We believe that Affin is still overvalued at current juncture, given the multiple headwinds it faces in the near future. We feel that benefits brought about by a new shareholder will take some time to manifest.

Source: MIDF Research - 30 Sep 2024