AMBANK (1015) : AMMB upgraded to Hold at UOB Kay Hian Research
KUALA LUMPUR: UOB Kay Hian Malaysia Research has upgraded AMMB Holdings to a Hold from Sell with a higher target price of RM6.85 from RM6.70.
It said on Thursday the target price was based on 1.46 times FY15F price-to-book and return on equity of 12.2%.
“AMMB’s prospects for FY15 are likely to remain challenging. However, we believe most of the downside risk has been priced in with its share price having declined 11.8% year-to-date.
“In addition, its 2QFY15 earnings indicate an earnings recovery momentum is well underway. Entry price is RM6.40,” it said.
UOB Kay Hian Research said being a potential takeover target could spur trading interest in AMMB. Entry price is RM6.40.
Commenting in the first half results for the period ended Sept 30, 2014, it said that after stripping out the one-off insurance disposal gain of RM389.9mil and integration expense of RM72.8mil, AMMB reported 1HFY15 core net profit of RM775.3mil (-3.5 on-year) and 2QFY15 core net profit of RM445.8mil (+1.1%, +35.4% on-quarter).
“On an annualised basis, 1HFY15 core net profit was 7.3% below our full-year forecast and 16% below consensus,” it said.
Although 1HFY15 annualised earnings are still below expectations, there was a commendable sequential recovery in 2Q15 earnings (+35.4% on-quarter) on the back of significantly lower provisions, a sharp decline in operating cost and net interest margins enhancement from the recent rate hike in July.
“The stock has declined by a rather sharp 8.3% in a relatively short three months since we downgraded our recommendation to a Sell in mid-August, underperforming the FBM KLCI index by 5.3%.
“We believe that most of its weak fundamental earnings outlook for FY15 has largely been reflected in its current subdued share price. Stronger earnings recovery momentum in 2HFY15 should help lift sentiment and hence share price recovery.
“If we peg a 15% premium to our Gordon Growth-derived fair value P/B of 1.43 times, we estimate a potential targeted M&A valuation of 1.64 times for AMMB, which would equate with a potential estimated acquisition price of only RM7.15 a share.
“Factoring in lower credit cost of 20bp but partially offset by lower loan growth of 3% versus our original assumption of 5%, we raise our FY15 and FY16 net profit forecasts by 2% and 1% respectively,” it said.
http://www.thestar.com.my
KUALA LUMPUR: UOB Kay Hian Malaysia Research has upgraded AMMB Holdings to a Hold from Sell with a higher target price of RM6.85 from RM6.70.
It said on Thursday the target price was based on 1.46 times FY15F price-to-book and return on equity of 12.2%.
“AMMB’s prospects for FY15 are likely to remain challenging. However, we believe most of the downside risk has been priced in with its share price having declined 11.8% year-to-date.
“In addition, its 2QFY15 earnings indicate an earnings recovery momentum is well underway. Entry price is RM6.40,” it said.
UOB Kay Hian Research said being a potential takeover target could spur trading interest in AMMB. Entry price is RM6.40.
Commenting in the first half results for the period ended Sept 30, 2014, it said that after stripping out the one-off insurance disposal gain of RM389.9mil and integration expense of RM72.8mil, AMMB reported 1HFY15 core net profit of RM775.3mil (-3.5 on-year) and 2QFY15 core net profit of RM445.8mil (+1.1%, +35.4% on-quarter).
“On an annualised basis, 1HFY15 core net profit was 7.3% below our full-year forecast and 16% below consensus,” it said.
Although 1HFY15 annualised earnings are still below expectations, there was a commendable sequential recovery in 2Q15 earnings (+35.4% on-quarter) on the back of significantly lower provisions, a sharp decline in operating cost and net interest margins enhancement from the recent rate hike in July.
“The stock has declined by a rather sharp 8.3% in a relatively short three months since we downgraded our recommendation to a Sell in mid-August, underperforming the FBM KLCI index by 5.3%.
“We believe that most of its weak fundamental earnings outlook for FY15 has largely been reflected in its current subdued share price. Stronger earnings recovery momentum in 2HFY15 should help lift sentiment and hence share price recovery.
“If we peg a 15% premium to our Gordon Growth-derived fair value P/B of 1.43 times, we estimate a potential targeted M&A valuation of 1.64 times for AMMB, which would equate with a potential estimated acquisition price of only RM7.15 a share.
“Factoring in lower credit cost of 20bp but partially offset by lower loan growth of 3% versus our original assumption of 5%, we raise our FY15 and FY16 net profit forecasts by 2% and 1% respectively,” it said.
http://www.thestar.com.my
