Kenanga Research believes the raised funds could help maintain loan growth at double-digit levels with minimal impact on dividend payouts.
PETALING JAYA: Alliance Bank Malaysia Bhd
’s (ABMB) proposed right issue to raise RM600mil in fresh capital aims to support its 10% to 12% loan growth target over the next two years, while strengthening its common equity tier 1 (CET1) ratio to 13.5%.
In an analyst briefing, the bank stated that the exercise will help shift it from a capital-dilutive to a capital-neutral position within the timeframe of its “Acceler8” strategy, targeting an optimum CET1 ratio of 12.5% to 12.8%.
While analysts noted that the proposed rights will be earnings-dilutive, Kenanga Research believes the raised funds could help maintain loan growth at double-digit levels with minimal impact on dividend payouts.
“To achieve equivalent RM600mil in capital preservation, ABMB would have otherwise needed to abstain from paying dividends over two financial years.
“Based on the current 40% to 50% payout, every 10% reduction in payout would have equated to around RM70mil earnings retained. Reducing payout is seen as the less desirable option to shareholder value creation,” Kenanga Research explained.
The research house has upped its call on the bank to “outperform” from “market perform”, but maintained its target price (TP) at RM5.30 a share without taking into account the potential dilution arising from the proposed rights issue.
“Assuming we reflect the illustrated 9% enlargement to share base alongside the RM600mil capital injection, our 2026 book value per share of RM5.43 would be reduced to RM5.24,” it added.
The retreat in the share price also puts ABMB’s dividend returns at more attractive levels at mid-5%, as opposed to mid-4% during its peak, the research house noted.
MIDF Research also upgraded ABMB to a “buy” from a “hold”, with an unchanged TP of RM5.02 per share, following the drop in the bank’s share price after the announcement of the corporate exercise.
The TP is based on an unchanged price-to-book value (P/BV) of 0.94 times for financial year 2026 (FY26).
The research house stated that the proceeds from ABMB’s rights issue are expected to fuel growth in FY26 and FY27, with limited visibility beyond that period.
“Management states that loan growth should at least keep pace at 10% to 12% levels in the following two years, before slowing down post FY27.
“Keep in mind that these 10% to 12% levels are higher than the initial 8% to 10% loan growth figures specified when Acceler8 was first announced. These new loans should be return-on-equity accretive,” the research house stated.
Meanwhile, Phillip Capital Research noted a higher CET1 ratio would support ABMB’s ambition to secure an upgrade to its corporate credit rating to “AA” (from “A”), potentially lowering funding costs, improving investor appetite and broadening institutional eligibility.
It maintained its “hold” call on the bank with a TP of RM5 a share.
CIMB Research stated that ABMB explained its scaling-up strategy under the refreshed Acceler8 strategic plan, which involves initially front-loading growth and investments.
“Before the launch of its Acceler8 strategy, the company’s growth had been relatively modest, with revenue growth of 3.8% per annum (compared with 13.5% currently), led by moderate loan growth – meaning that ABMB was essentially losing market share in domestic loans prior to FY23,” it said.
The RM600mil rights issue will enable ABMB to generate RM5il to RM6bil of new loans over the next two to three years.
CIMB Research kept its “buy” rating on the bank with an unchanged TP of RM5.70 per share for FY26, based on a fair P/BV of 1.2 times and assuming a rights issue price of RM4.20, on a one-right-for-every-31-shares basis.
