Monday, 30 April 2012

MIDF Research starts coverage on Affin with Buy rating, target price RM3.50

KUALA LUMPUR (April 30): MIDF Research has initiated coverage on AFFIN HOLDINGS BHD [] at RM3.05 with a target price of RM3.50 and said Affin’s net profit had been gradually improving with higher operating income and lower loan loss provisions.

It said in a note Monday that the group achieved a CAGR for net profit after tax and minority interest (PATAMI) of 15.1% for the period of FY07-FY11.

ROE has improved from 6.5% in FY07 to 9.4% in FY11. We expect the ROEs for both FY12 & FY13 to be in the high single digit of 8.9%, it said.

“Our fair value for the stock of is based on a PBVR of 0.9x on FY12 BVPS which equates to a PER of 10x . Valuation is undemanding as it is currently trading at less than 1.0x of its book value as at end of Dec’11 and a discount to the average PBVR of the sector.

“We believe that concerns of liquidity of the stock, lower ROE compared to peers, the lack of regional exposure with the bulk on loans on hire purchase (29.3% of total loans) and mortgages (27.2% of total loans) which are expected to be challenging moving forward have been priced in by market,” said MIDF Research.

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