CIMB Research said it has turned more positive on the group’s mid to long-term growth potential.
PETALING JAYA: Affin Bank Bhd
is expected to see a shift in its growth trajectory as structural changes and execution gains begin to reshape investor expectations over the medium to long term.
The outlook suggests that its valuation could respond ahead of earnings as confidence builds around the bank’s strategy and balance sheet efficiency, analysts said.
CIMB Research said it has turned more positive on the group’s mid to long-term growth potential, as it believes the bank can now offer a differentiated growth proposition.
“This is underpinned by three levers: new wealth management capabilities via the 100% acquisition of Pheim Asset Management; funding cost optimisation supported by current account-savings account growth and product expansion via its digital-at-core banking system platform, which is highly scalable, and ahead of peers’; and the group’s plan to address capital inefficiencies at the over capitalised investment bank and the transition from the standardised approach to the internal ratings-based approach,” the research house said.
CIMB Research upgraded Affin Bank to a “buy” from “hold” and lifted the counter’s target price to RM3.10 from RM2.50.
It said that the upgrade in the rating and higher target price is based on a higher end-2026 estimated price-to-book (P/BV) multiple of 0.65 times from 0.57 times, premised on an adjusted return on equity (ROE) of 7.2%, cost of equity of 9.5% and a terminal growth of 3%.
CIMB Research noted that the target price multiple sits well above historical norms but remains defensible.
“Our target P/BV multiple of 0.65 times is close to two standard deviation above Affin Bank’s 10-year P/BV mean of 0.47 times, and is justified by the rise in our ROE assumption for the bank,” the research house said
It added that the bank’s current valuation implies overly pessimistic assumptions about its profitability and execution.
“Trading at 0.53 times this year and last year’s P/BV, Affin offers the lowest P/BV multiple in our bank coverage,” CIMB Research said.
The research house that the discount to the bank’s shares fails to reflect progress in the scalability of its digital platform and capital optimisation.
