AMMB Holdings (RM4.22; Buy; Price Target RM5.20; AMM
MK)
Post AGM guidance
AMMB had its AGM yesterday and guided a net profit
forecast of RM800-900m for FYMar10. This was despite
posting a strong set of results in 1QFYMar10 of RM258m,
which was an improvement of 27% y-o-y and 43% q-o-q,
lifted by better contributions from investment banking and
insurance. AMMB remains cautious on the lag effect of NPLs
with potential increases towards the end of the calendar
year. However, if economic conditions are not as severe as
expected and the pent-up demand buying holds up, AMMB
said its profit performance could be better. AMMB also
guided the following FYMar12 targets: net profit of
RM1.2bn, net NPL of 2-3% and ROE of 15%. AMMB also
stated that they could proceed with the issuance of
between RM200-400m of innovative Tier-1 securities to
ensure a more appropriate capital composition towards
capital management in FYMar11.
We expect provisions to remain high for the rest of
FYMar10 as AMMB will continue to provide on a case by
case basis. NIMs are expected to remain soft in view of
competition in retail and business banking. Capital ratios
will improve with the inclusion of new equity capital from
the bumiputra issue and converted ordinary shares (from
Exchangeable Bonds). We estimate pro-forma Tier-1 CAR of
11.5% and RWCAR of 15.8%, which we believe is more
than sufficient to support a higher dividend payout in the
future, which could aid in its target towards a higher ROE of
15% by FYMar12.
AMMB is one of our top picks for the Malaysian banks. We
still see value in AMMB as it transforms its balance sheet
and earnings profile. We maintain our target price at
RM5.20 based on the Gordon Growth Model, which implies
1.5x CY10 BV, equivalent to mid-cycle P/BV.
No comments:
Post a Comment