Stock Name: AMMB
Company Name: AMMB HOLDINGS BHD
Research House: CIMB
AMMB Holdings Bhd
(May 17, RM5.04)
Maintain outperform at RM4.99, target price raised to RM6.50: In line with our forecast. AMMB's FY3/10 net profit rose 17.2% year-on-year (y-o-y) to touch the RM1 billion mark, 5.2% above consensus but only 1.2% higher than our forecast.
However, the final net dividend per share (DPS) of 9.4 sen (gross: 4.4 sen less tax and 6.1 sen single tier) was above our 8.4 sen estimate. Factoring in a stronger loan growth, net non-performing loans (NPL) ratio and Islamic banking income, we up our FY11-12 EPS (earnings per share) forecasts by 7%-8% and our target price from RM6.15 to RM6.50 (10% premium over dividend discount model value). We see bright prospects ahead and project net profit growth of 18% for FY11. The stock remains our top pick and an outperform, premised on the potential re-rating catalysts of (1) value-add from ANZ, (2) benefits from the group revamp, (3) potential increase in investment banking income from improved deal flow, (4) new growth avenue in the foreign exchange and derivative businesses, and (5) the strong FY10 results and higher-than-expected dividend.
The 22.2% y-o-y rise in FY10 revenue was largely driven by a 58.1% y-o-y jump in non-interest income. This was underpinned by investment income of RM230.4 million (RM9.6 million in FY09), 18.5% y-o-y rise in fee income and foreign exchange gain of RM3.7 million (versus a loss of RM15.5 million in FY09).
The robust loan growth of 11.7% y-o-y in FY3/10 beat our forecast of 8%, the industry's growth of 9.8% and the 4.9% rate a year ago. Net NPL ratio improved from 1.8% in December 2009 to 1.5% in March 2010 (versus our 2.6% forecast). Loan loss coverage rose from 92.8% to 99.5%.
Our 7%-8% upgrade of FY11-FY12 forecasts is underpinned by: (1) an increase in FY11 loan growth from 8.8% to 11.5%, (2) a cut in FY11-FY12 net NPL ratio from 2.5%-2.6% to 1.3%-1.5%, and (3) 31%- 37% upgrades of FY11-FY12 Islamic banking income.
FY11 DPS is raised by 16.5% to 19 sen as we increase our assumed dividend payout ratio from 30% to 35%, in line with the levels in FY12-FY13.
The earnings upgrade lifts our target price from RM6.15 to RM6.50, still pegged to a 10% premium over the DDM value (cost of equity of 15.2% and dividend growth rate of 18.9% in the interim growth phase). ' CIMB Research, May 17
This article appeared in The Edge Financial Daily, May 18, 2010.
Company Name: AMMB HOLDINGS BHD
Research House: CIMB
AMMB Holdings Bhd
(May 17, RM5.04)
Maintain outperform at RM4.99, target price raised to RM6.50: In line with our forecast. AMMB's FY3/10 net profit rose 17.2% year-on-year (y-o-y) to touch the RM1 billion mark, 5.2% above consensus but only 1.2% higher than our forecast.
However, the final net dividend per share (DPS) of 9.4 sen (gross: 4.4 sen less tax and 6.1 sen single tier) was above our 8.4 sen estimate. Factoring in a stronger loan growth, net non-performing loans (NPL) ratio and Islamic banking income, we up our FY11-12 EPS (earnings per share) forecasts by 7%-8% and our target price from RM6.15 to RM6.50 (10% premium over dividend discount model value). We see bright prospects ahead and project net profit growth of 18% for FY11. The stock remains our top pick and an outperform, premised on the potential re-rating catalysts of (1) value-add from ANZ, (2) benefits from the group revamp, (3) potential increase in investment banking income from improved deal flow, (4) new growth avenue in the foreign exchange and derivative businesses, and (5) the strong FY10 results and higher-than-expected dividend.
The 22.2% y-o-y rise in FY10 revenue was largely driven by a 58.1% y-o-y jump in non-interest income. This was underpinned by investment income of RM230.4 million (RM9.6 million in FY09), 18.5% y-o-y rise in fee income and foreign exchange gain of RM3.7 million (versus a loss of RM15.5 million in FY09).
The robust loan growth of 11.7% y-o-y in FY3/10 beat our forecast of 8%, the industry's growth of 9.8% and the 4.9% rate a year ago. Net NPL ratio improved from 1.8% in December 2009 to 1.5% in March 2010 (versus our 2.6% forecast). Loan loss coverage rose from 92.8% to 99.5%.
Our 7%-8% upgrade of FY11-FY12 forecasts is underpinned by: (1) an increase in FY11 loan growth from 8.8% to 11.5%, (2) a cut in FY11-FY12 net NPL ratio from 2.5%-2.6% to 1.3%-1.5%, and (3) 31%- 37% upgrades of FY11-FY12 Islamic banking income.
FY11 DPS is raised by 16.5% to 19 sen as we increase our assumed dividend payout ratio from 30% to 35%, in line with the levels in FY12-FY13.
The earnings upgrade lifts our target price from RM6.15 to RM6.50, still pegged to a 10% premium over the DDM value (cost of equity of 15.2% and dividend growth rate of 18.9% in the interim growth phase). ' CIMB Research, May 17
This article appeared in The Edge Financial Daily, May 18, 2010.
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