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Stay BUY, with new MYR4.40 TP from MYR4.00, 21% upside and c.5% FY23F (Mar) yield. FY22 results were above expectations, with successful capital rebuild paving the way for a resumption of dividend payout. Management is targeting FY23F ROE of c.10%, underpinned by healthy underlying profits and lower credit cost. With issues on capital and oil & gas exposures dealt with, we expect share price to re-rate given its undemanding valuation of 0.7x FY23F P/BV.
FY22 beat expectations. Net profit of MYR391.8m (-3% QoQ) in 4QFY22, lifted FY22 earnings to MYR1,503m (FY21: MYR3,826m net loss) – which was 107% and 114% of our and Street FY22F. The positive variance was mainly due to lower-than-expected impairment charges and tax expense. Effective tax rate of 11.5% reflected the recognition of MYR265.6m in tax credit (related to the MYR2.83bn settlement – details on page 4) that offset MYR105.7m in Cukai Makmur. ROE improved to 9.3% (FY21: 5% core). With CET-1 strengthening to 11.8% (target: 12%), AMMB resumed its dividend payment, with a final dividend of 5 sen/share declared (payout ratio: 11%).
Key trends in 4QFY22. PIOP was down 14% QoQ as NII fell 4% QoQ on NIM contraction (-9bps QoQ on lower asset yields), non-II dropped 8% QoQ on lower trading and investment income, while CIR rose to 49.6% (3QFY22: 44.7%) as opex grew 5%. Loans were up 6.5% YoY on broad-based growth. Deposits rose by 1.7% YoY but CASA deposits grew 20.6% YoY, lifting CASA ratio to 35.2%. Net impairment charges declined 85% QoQ to MYR51m (3QFY22: MYR337.5m) with a reversal of management overlays to offset the provision charge for oil & gas exposures of MYR325m. This reduced outstanding overlays to MYR394m, from MYR950m in Dec 2021.
Asset quality. Loans under repayment assistance (LURA) was reduced to MYR6.6bn (6% of gross loans) as at 13 May from MYR17.8bn (16% of loans) on 18 Feb 2022. GIL ratio improved to 1.4% at end-FY22 (FY21: 1.57%) with LLC higher at 139.2% (FY21: 124.1%). For FY22, impairment charges for oil & gas exposures (loans, bonds and contingencies) amounted to MYR747m. This raised provision coverage to >80% for two significant oil & gas exposures. Net credit cost was 64bps in FY22, down from 97bps in FY21.
FY23 guidance. Management is targeting ROE of 9.8-10% for FY23. This would be underpinned by stronger loan growth of 7%, stable to slightly higher NIM of 2.05-2.10% (FY22: 2.05%) supported by a large 80% of loan on variable rates and fixed deposits duration of 7-8 months, and lower net credit cost of 35-40bps. With CET-1 ratio expected to improve further with planned divestures, dividend payout would normalise to 35-40%.
Earnings and TP. Our FY23F net profit is unchanged as downward revisions in operating income are offset by lower impairment charges and operating expenses (Figure 3). Our TP is raised to MYR4.40 (from MYR4.00) as intrinsic value is revised to MYR4.48 (from MYR4.09) on refresh of GGM assumptions. A 2% ESG discount based on our in-house ESG methodology (Figure 4) is applied. The intrinsic value is based on GGM-derived P/BV of 0.8x.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....