Quick take: Bumper dividend lifts Affin Bank

KUALA LUMPUR: Shares of Affin Bank Bhd rose over 9% in early trade Wednesday after it declared a special dividend amounting to RM400.21mil and an interim dividend of RM100.22mil.

The counter jumped 19 sen or 9.41% to RM2.21 at 10.35 am. Year-to-date, the banking group has appreciated by over 27%.

Affin said the special dividend proposal follows its divestment in Affin Hwang Asset Management Bhd by its unit Affin Hwang Investment Bank Bhd to Starlight Asset Sdn Bhd which was announced earlier in the year.

CGS-CIMB Research, in a report, said the size of the special dividend was smaller than its estimate of 22 sen per share.

The special dividend translates to an additional dividend yield of 8.9% for FY22.

“On the same date, Affin also declared an interim DPS of 4.5 sen. Altogether, the total dividend per share (DPS) declared was 22.5 sen, slightly higher than our previous DPS projection of 21 sen for FY22F. This translated to a bumper dividend yield of 11.1% for FY22F,” CGS-CIMB said.

The research house has raised its FY22F DPS forecast for Affin from 21 sen to 22.5 sen to match the total DPS declared on 18 Oct.

“Meanwhile, we also increase our DDM-based target price (TP) from RM2.31 to RM2.44 following the rollover of our valuation to end-2023F,” it said.

CGS-CIMB said the special dividend (that lifts its FY22 dividend yield to an enticing 11.1%) and its strongest loan growth in the sector, are the potential re-rating catalysts that underpin its “add” call on Affin Bank.

“We project a turnaround in Affin’s core EPS growth from a decline of 19.4% in FY22F to an expansion of 23.1% in FY23F,” it said.

It added that the earnings drivers in FY23F would be the absence of Cukai Makmur taxation that will lower its effective tax rate from 31.7% in FY22F to a normalised 24% in FY23F, and its projection of a 9.8% drop in FY23F loan loss provisioning.