KUALA LUMPUR: CIMB Equities Research is retaining its Add call for Affin Bank with a target price of RM2.81, which is 11.1% above the last traded price of RM2.53.
It said on Monday Affin Bank took over the listing status of Affin Holdings
on Feb 2 following the group’s internal reorganisation exercise to collapse its corporate group structure.
The exercise resulted in the elimination of Affin Holdings and the elevation of Affin Bank, the commercial banking entity, as group holding company. The exchange ratio for the shares in Affin Bank and Affin Holdings was one-to-one.
“Our FY17-19F net earnings forecasts remain unchanged for Affin Bank compared to Affin Holdings, as Affin Bank houses all the major entities of Affin Holdings,” it said.
CIMB Research noted that the internal reorganisation and the change of the listing entity do not alter its views on the stock.
“We maintain our Add recommendation for Affin, premised on its attractive valuations, and benefits from the Affinity transformation programme. The downside risks to our call are a spike in gross impaired loans, and a slowdown in loan growth,” it said.
The research house also said its EPS forecasts and dividend discount model-based target price of RM2.81 are intact as both Affin Bank and Affin Holdings have the same share base.
The internal reorganisation eliminated the costs at the holding company level (Affin Holdings). However, we expect the magnitude of this to be small and for its impact on earnings to be negligible.
Following the internal reorganisation, Affin Bank will continue to implement its Affinity transformation programme, which aims to (1) improve the group’s operating efficiency, (2) increase the generation of fee income, (3) preserve margins, and (4) improve loan growth.
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