Stock Name: AFFIN
Company Name: AFFIN HOLDINGS BHD
Company Name: AFFIN HOLDINGS BHD
| Research House: KENANGA | Price Call: BUY | Target Price: 4.30 |
We view AFFIN's potential capital injection plan positively.We believe the fresh capital raised will be used to strengthen AFFIN's capitalbase to support its business expansion plan, either through acquisition ororganic growth. We are reiterating ourOUTPERFORM rating on AFFIN with an unchanged target price of RM4.30.
Plan to boostcapital. According to media, AFFIN Banking Group's (AFFIN) ManagingDirector, Datuk Zulkiflee Abbas Abdul Hamid, said the group has a plan to boostits Tier 1 and Tier 2 capital by RM500m in the first half of this year to meet the Basel 3 requirements as well assupporting its projected business growth plan.
Meanwhile, in a separate announcement, its Chairman Tan Sri MohdZahidi Zainuddin said the group is still interested in acquiring at least a 51%or a majority stake in Indonesia's PT Bank Ina Perdana. AFFIN had previously put the plan on holdbecause of a report which stated that the central bank of Indonesia wasconsidering to cap foreign ownership in banks to less than 50%.
Positive move. Weview AFFIN's capital injection plan positively. We believe the potential fresh capital raised will be used to strengthenAFFIN's capital base to support its business expansion plan, either throughacquisition or organic growth.
We believe AFFIN's existing 10.9% CAR and 12.8% RWCR as at 31Dec 2011 are enough to support its organic loan growth target in the range of10-12% as well as comply with the new Basel III requirements. As such, furthercapital raising exercises could be meant for potential acquisitions in ourview. PT Bank Ina Perdana acquisition will translate to stronger contributionsfor AFFIN's top line in the coming years and gives it a new presence in Indonesia.
We believe that AFFIN parents companies, Lembaga Tabung AngkatanTentera (35.3%), Boustead Holding Berhad (20.69%) and Bank of East Asia (23.5%)would not have any issues in supporting the potential capital injection plan asall three are known as financially strong institutions.
Maintain OUTPERFORMrating. We reiterate our OUTPERFORM recommendation on AFFIN. In our view, AFFIN presents a good andunderappreciated investment proposition. We see rooms for further expansion inits valuation multiples in the coming years. Our TP of RM4.30 is based on atargeted 1.0x of its FY2013 P/BV.
Source: Kenanga
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