KUALA LUMPUR (July 20): CGS-CIMB Research sees possibility of a 22 sen per share special dividend from the sale of Affin Bank Bhd’s 63% stake in its asset management unit Affin Hwang Asset Management (AHAM).

The bank expects the proposed disposal of its stake in AHAM — to be completed by end July 2022 — to increase its common equity Tier-1 (CET1) capital ratio from 13.9% at end-March 2022 to circa 16%, said CGS-CIMB in a research note on Tuesday (July 19).

“As this would be higher than the CET1 capital ratio of 15.1% for the industry, we see the possibility of Affin paying out some of the AHAM divestment proceeds as a special dividend. Assuming its CET-1 capital ratio post disposal is lowered from 16% to the industry’s 15.1%, we estimate a special dividend of 22 sen per share (additional dividend yield of 11.2%). Any special dividends by banks are subject to Bank Negara Malaysia’s approval,” said the research house.

It was reported in late May that Affin Bank intends to pay a special dividend to shareholders upon completion of its entire 63% stake sale, comprising seven million shares in AHAM, by Affin Bank's 100%-owned subsidiary Affin Hwang Investment Bank Bhd for RM1.42 billion to Starlight Asset Sdn Bhd.

The bank’s president and group chief executive officer Datuk Wan Razly Abdullah Wan Ali said the divestment — which has been approved by its shareholders — will result in a gain of RM1.063 billion for Affin Bank.

CGS-CIMB upgraded its call on the stock to ‘add’ from ‘hold’ previously given its best-in sector loan growth in the financial year ending Dec 31, 2022 (FY22) and potential special dividend.

“We lower our EPS [earnings per share] forecasts by 2-4% for FY22-24F as we increase our assumed share base from 2.12 billion shares to 2.21 billion shares to factor in the 88.3 million new shares issued under the dividend reinvestment plan.

“This pushes down our DDM [dividend discount model]-based target price (cost of equity of 10.3% and terminal growth rate of 3%) from RM2.19 to RM2.17,” the research house added.

For the full FY21, Affin Bank's net profit soared nearly 129% to RM526.93 million from RM230.32 million a year ago. Cumulative revenue in FY21 was marginally lower by 1.05% at RM2.24 billion against RM2.26 billion. It declared a final dividend of 12.5 sen per share.

Affin Bank shares were unchanged at RM1.93 at the time of writing on Wednesday (July 20), with a market capitalisation of RM4.27 billion. The stock has risen 11.56% year-to-date from RM1.73.