KUALA LUMPUR (Feb 28): Analysts on Monday (Feb 28) advised investors to accumulate AMMB Holdings Bhd due to its attractive valuation.
CGS-CIMB analyst Winson Ng said in a note that he retained his "add" rating on AMMB given its attractive valuation of 7.2 times 2022 forecast price to earnings (P/E), which is the lowest in the sector and significantly lower than the sector’s 12.6 times.
“A potential re-rating catalyst is earnings per share (EPS) recovery with our projected core EPS growth of 35.1% in FY22 (financial year ending March 31, 2022) and 14.2% in FY23, driven by improved loan loss provision and expansion in net interest income,” he said while maintaining its FY22 to FY24 EPS forecasts at 43 sen, 49 sen and 52 sen.
Although AMMB's core net profit for the nine months ended Dec 31, 2021 (9MFY22) accounted for 81.5% of his full-year forecast, he deemed this in line with an anticipated weaker core net profit for the fourth quarter ended March 31, 2022 (4QFY22).
He is projecting a core net profit of RM251.9 million for AMMB in 4QFY22, which represents a 37.5% quarter-on-quarter decline as he expects the taxation write-back of RM235.4 million in 3QFY22 will not be sustainable.
However, he said the 4QFY22 core net profit would surge by 163.5% year-on-year (y-o-y), as he projected a 63% y-o-y plunge in 4QFY22 loan loss provision.
AMMB announced last Friday that its net profit for 3QFY22 rose 52.86% to RM403.29 million from RM253.83 million a year ago due to a tax credit. For 9MFY22, the banking group's net profit also increased 28.2% to RM1.11 billion from RM866.31 million a year ago.
In a separate note, RHB Research analysts Fiona Leong and Eddy Do said the loan book clean-up, improving prospects for resumption of dividend payouts, and undemanding valuation are all catalysts for AMMB share price re-rating.
They maintained a "buy" call on the stock and revised its target price to RM4 from RM3.90.
Their FY22 forecast net profit was higher by 10% as they factored in the tax credit, which more than offset higher provisions for oil and gas exposures.
They said AMMB’s 9MFY22 results were above expectations, helped by a RM234.5 million tax credit.
Meanwhile, Maybank Investment Bank Research analyst Desmond Ch’ng said in a note that he maintained a "buy" call on AMMB and revised up its target price to RM4.05 from RM3.90.
He said that AMMB 3QFY22 core earnings were below expectations due to higher provisions and he lowered its FY22/FY23 earnings by 6% to 12% on higher credit cost assumption.
However, he looked to core earnings growth of 13% in FY23 in the absence of Cukai Makmur and marginally lower provisions.
He has also conservatively assumed a dividend payout ratio of 20% against a historical average of 30% to 40%.
KAF Research analyst Rachel Huang said in a note that she maintained a "buy" on AMMB given its attractive valuation.
“AMMB’s 3QFY22 net earnings (excluding reversal of tax provision and prosperity tax) was 24% lower quarter-on-quarter mainly due to top-up provisioning for a couple of large oil and gas exposures. However, we view the provisioning positively as this will likely remove lingering concerns over its oil and gas exposure,” she said.
At midday break, AMMB slipped nine sen or 2.62% to RM3.34, valuing the group at RM11.37 billion.
Over the past one year, the counter has climbed 19.29%.