This article first appeared in The Edge Financial Daily on September 26, 2017

Affin Holdings Bhd
(Sept 25, RM2.56)
Maintain buy with an unchanged target price of RM3.70: Affin Holdings Bhd has announced details of its proposed reorganisation exercise, which would ultimately end with Affin’s listing status on the Main Market of Bursa Securities to be transferred to Affin Bank Bhd.

In more details, the proposed reorganisation will involve the transfer of the investment banking business, money brokerage, life and general insurance business to Affin Bank. New Affin Bank shares amounting to 254.2 million will be issued for Affin Hwang Investment Bank Bhd, Affin Moneybrokers Sdn Bhd and AXA Affin Life Insurance Bhd. 

This would result in both Affin and Affin Bank having the same resultant number in shares in issue, that is 1.94 billion. With the equal amount of shares, Affin will be able to undertake a distribution-in-specie of one Affin Bank share for each existing Affin share. 

As such, the proposed reorganisation will not have any effect on the substantial shareholding of Affin. 

We remain positive about Affin’s proposed reorganisation plan, as the new corporate structure is expected to enhance the bank’s capital adequacy ratios. 

Coined the “Affinity Programme”, the bank has embarked on a comprehensive transformation plan to address the challenges and opportunities it currently faces. However, competition will continue to pose a challenge to the group’s efforts as loan growth remains modest and margins compress as demand for deposit gathers pace. — TA Securities, Sept 25