PETALING JAYA: Some analysts are calling a “buy” on AMMB Holdings Bhd (AmBank), describing it as the cheapest financial stock at the moment while dismissing its past links to 1Malaysia Development Bhd (1MDB).
Banking group AmBank has seen share price weakness post-14th general election, partly attributed to concerns over its purported past business association with the controversial 1MDB.
However, several analysts believed that such concerns have been largely alleviated and AmBank should no longer be weighed down by its previous links with 1MDB.
Maybank Investment Bank (IB) Research, which has upgraded its rating on AmBank to a “buy”, described the 1MDB-AmBank link as “less of a concern”.
“We take the view that these concerns need to be tempered by the fact that a new management is in place with a new chief executive officer and chief financial officer at the helm.
“Apart from that, the group has since been penalised by Bank Negara and much is being spent on strengthening its internal controls,” said the research house in a note.
Despite an upgrade in its stock recommendation, MayBank IB Research has revised AmBank’s target price lower at RM4.30 from RM4.60 previously.
This was mainly due to its reduced earnings and return-on-equity estimates on the banking group.
AllianceDBS Research has also upgraded its recommendation on AmBank to a “buy”, adding that the stock is “too cheap to ignore”.
According to the research firm, AmBank’s current valuation is reflective of the concerns surrounding the banking group.
“AmBank is now one of the cheapest valued banks in Malaysia at 0.6 times its 2018 price-to-book value, which we believe is unjustified. The management is addressing concerns relating to asset quality, which could result in a potential non-performing loan sale.
“It is also well prepared for MFRS 9, has diversified its loan exposure and is relooking at its existing business to see how it can best optimise its structure.
“Concerns relating to a certain ‘transaction’ are believed to have been addressed,” the brokerage said in a note.
AllianceDBS Research has left its target price for AmBank unchanged at RM4.10.
The research firm believed that AmBank’s current financial year 2019 would be better in performance, amid some challenges. The group’s improved revenue streams offsetting normalising credit costs are expected to be the potential catalyst for a re-rating, moving forward.