AMBANK held its inaugural Digital Day yesterday where it shared its digital strategies to strengthen operations. This all ties in with the group’s long-term targets and future proof against potential competition arising from eventual digital banking entries in the coming years. BUY with a TP of RM4.75 based on an unchanged CY23F PBV of 0.84x. We believe the group could be a key beneficiary of the ongoing economic recovery from its notable SME loans profile (21%). Meanwhile, the group’s possible re-entry as a KLCI constituent could spur buying interest from portfolio recalibration.

The group indicated an annual spend of RM250m to support its digital transformation initiatives. Emphasis on data analytics would be essential in streamlining infrastructure and to understand consumer behaviour better.

To establish a more comprehensive network of offerings, the group is progressively building a growing portfolio of collaborators. These include companies in telco networks, logistics as well as financial and investment services sectors. Via its partnerships, all parties would benefit from a wider sales distribution for more seamless cross-selling opportunities and customer onboarding. Meanwhile, the greater accessibility could provide entry to previously untapped market in the retail and business segments.

In Oct 2022, the group launched its hybrid e-wallet with Merchantrade to form the Merchantrade Money app. This would enable the group to participate in a growing e-financial services market which is seeing growing relevance as cashless transactions are becoming a norm. To date, the platform has the highest wallet size in the market of RM50,000 and supports multicurrency transactions.

The emergence of digital banking threats when they do commence operations in CY23-24 in targeting microlending clients as per Bank Negara’s mandate, could progressively encroach into the significant larger traditional banking market share in the medium term. With that in mind, the group believe that its efforts would cement their brand identity going forward and enable them to compete competitively with its digital infrastructure.

Source: Rakuten Research - 9 Nov 2022