AFFIN (5185) - Affin Holdings - Banking on net write-back in LLP again
Target RM2.87 (Stock Rating: REDUCE)
Affin’s FY14 net profit was above expectations, accounting for 114% of our forecast and 119% of consensus, mainly due to a net write-back of RM16.2m in loan loss provisioning (LLP) compared to our projected provision of RM50.6m. As expected, no dividend was declared in 4Q14. Our DDM-based target price (COE of 13%; LT growth of 4%) is intact. Despite the stronger-than-expected 4Q14 results, Affin remains a Reduce, premised on the potential de-rating catalysts of (1) expected upturn in credit costs, (2) margin compression and (3) dilution from the rights issue. We prefer RHB Capital.
Not as rosy as it appears
Although the 25% yoy jump in 4Q14 net profit appears to be outstanding, it was partly driven by the net write-back in loan loss provisioning (LLP), which would not be repeated in FY15, in our view. Furthermore, 4Q14 EPS fell 3.8% yoy, reflecting the dilutive effect of its rights issue undertaken last year to fund the acquisition of HwangDBS Investment Bank. For FY14, net profit fell 6.9% while EPS declined by a larger margin of 18.9%.
Loan growth close to the industry’s pace
Loan growth recovered from 8.8% yoy in Sep 14 to 9.6% yoy in Dec 14, ahead of the industry’s pace of 9%. Surprisingly, the key driver was the 14.3% yoy rise in working capital loans in Dec 14 while the residential mortgages fell by 4.1% yoy. The momentum for auto loans also eased to 2.3% yoy in Dec 14.
An improvement in gross impaired loan ratio
The gross impaired loan ratio slid further from 1.91% in Sep 14 to 1.82% in Dec 14 but loan loss coverage fell from 76.6% to 75.6% over the same period.
Earnings risks persist
Notwithstanding the stronger-than-expected 4Q14 results, we still see earnings risks in FY15, including an expected upturn in credit costs and pressures on margins. Our cautious earnings outlook is reflected by a projected 9.6% drop in FY15 EPS.
Source: CIMB Daybreak - 27 February 2015
Target RM2.87 (Stock Rating: REDUCE)
Affin’s FY14 net profit was above expectations, accounting for 114% of our forecast and 119% of consensus, mainly due to a net write-back of RM16.2m in loan loss provisioning (LLP) compared to our projected provision of RM50.6m. As expected, no dividend was declared in 4Q14. Our DDM-based target price (COE of 13%; LT growth of 4%) is intact. Despite the stronger-than-expected 4Q14 results, Affin remains a Reduce, premised on the potential de-rating catalysts of (1) expected upturn in credit costs, (2) margin compression and (3) dilution from the rights issue. We prefer RHB Capital.
Not as rosy as it appears
Although the 25% yoy jump in 4Q14 net profit appears to be outstanding, it was partly driven by the net write-back in loan loss provisioning (LLP), which would not be repeated in FY15, in our view. Furthermore, 4Q14 EPS fell 3.8% yoy, reflecting the dilutive effect of its rights issue undertaken last year to fund the acquisition of HwangDBS Investment Bank. For FY14, net profit fell 6.9% while EPS declined by a larger margin of 18.9%.
Loan growth close to the industry’s pace
Loan growth recovered from 8.8% yoy in Sep 14 to 9.6% yoy in Dec 14, ahead of the industry’s pace of 9%. Surprisingly, the key driver was the 14.3% yoy rise in working capital loans in Dec 14 while the residential mortgages fell by 4.1% yoy. The momentum for auto loans also eased to 2.3% yoy in Dec 14.
An improvement in gross impaired loan ratio
The gross impaired loan ratio slid further from 1.91% in Sep 14 to 1.82% in Dec 14 but loan loss coverage fell from 76.6% to 75.6% over the same period.
Earnings risks persist
Notwithstanding the stronger-than-expected 4Q14 results, we still see earnings risks in FY15, including an expected upturn in credit costs and pressures on margins. Our cautious earnings outlook is reflected by a projected 9.6% drop in FY15 EPS.
Source: CIMB Daybreak - 27 February 2015
