AMMB’s 4QFY13 results were within our and consensus expectations. The results reflect the first full quarter for Kurnia and MBF Cards collectively, thus skewing comparisons. Our FY14 net profit forecast is relatively unchanged, but we raised our fair value to MYR8.35 from MYR7.60 after rolling forward valuations to 2014. BUY call maintained.

♦  Results in line. AMMB’s 4QFY03/13 net profit of MYR406m (+25% y-o-y; +3% q-o-q) was within our and consensus expectations with FY13 net profit of MYR1.64bn (+10% y-o-y) accounting for 99.5% of our and 97.5% of consensus full-year net profit estimates.

♦  4QFY13 highlights. 4QFY13 net profit rose 3% q-o-q to MYR406m thanks to a lower effective tax rate of 10% (3QFY13: 22%) due to a MYR137m tax writeback during the quarter for overprovision in prior years. Y-o-Y, 4Q net profit was up 25% mainly due to lower loan impairment allowances (-49% y-o-y) and lower effective tax rate (4QFY12: 26%). Gross loans expanded by 8.9% y-o-y, led by the non-retail segment. Meanwhile, customer deposits rose 10% y-o-y while CASA growth stayed robust at 29% y-o-y, but from a smaller base. Asset quality was intact with the gross impaired loan ratio at 1.98% (-6bps q-o-q) while LLC of 129% was significantly above system LLC of 99%.

♦  Dividend. As expected, AMMB declared a final single tier DPS of 15 sen (4QFY12: 13.5 sen, net). Full-year net DPS was 22 sen (FY12: 20.1 sen, net), translating to a net payout ratio of 40.6%.

♦  Briefing highlights. AMMB’s FY14 KPIs are: 1) Net profit growth of 10-12%; 2) ROE of 14-14.5%; 3) CIR not exceeding 46%; 4) Gross impaired loan ratio not exceeding 2%; and 5) Dividend payout ratio of 40-50%. We project FY14 net profit growth of 10%, broadly in line with management’s KPI. AMMB is still exploring its options with respect to potential strategic partners for the life and takaful businesses, and hopes to complete the tie-up by 1Q14. Meanwhile, with respect to the bid for Hwang-DBS, AMMB targets to complete the due diligence exercise within the next few days, before taking the deal to the Board by the end of the month.

♦  Forecasts.  We updated our FY14 numbers post the FY13 results and introduced our FY15 projections.

♦  Investment case. Fair value raised to MYR8.35 from MYR7.60, following a roll forward in valuations to 2014. Our target PER of 13x, however, is unchanged. BUY call maintained.

Source: RHB