Affin Hwang downgrades Maybank to Hold, TP cut to RM9

  • Business
  • Tuesday, 16 Apr 2019

KUALA LUMPUR: Reports of Hyflux Ltd's plan to restart talks with creditor to avoid liquidation  could be a positive development for MALAYAN BANKING BHD although the deadline for the former's debt moratorium in fast approaching.

According to Affin Hwang Capital research, Hyflux is exploring various possible outcomes.

"Based on a recent news report, the bailout deal between Singapore’s Hyflux Ltd. and an Indonesian consortium led by the Salim Group has fallen through (announced on 4th and 5th Apr 2019) and meanwhile, Hyflux has until 30th of April before its debt moratorium expires," the research house said.

"Failing which, there could be some negative repercussions on Maybank’s 2019E earnings, i.e. higher credit cost vs. its guidance of 40bps for 2019 (Affin’s 2019E: 47bps), should all parties failed to strike a deal."

To recap, Maybank has a total exposure of RM1.95bil to Hyflux, which covers project financing for Tuaspring's Integrated Water and Power Plant and TuasOne Waste-to-Energy Plant.

Maybank has set aside collective provisions of RM315.1mil.

"Nonetheless, we keep our earnings forecasts unchanged pending more developments and clarity from the situation. 

"Based on a worst-case-scenario, the Public Utilities Board of Singapore will take over the loss-making Tuaspring Desalination Plant without any compensation for Tuaspring," said Affin Hwang.

It downgraded its rating on Maybank from buy to hold and cut its target price from RM11.50 to RM9 in light of a less optimistic market outlook.

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