STOCK FOCUS OF THE DAY
Alliance Financial : Re-engineering strong loans
growth in 1Q HOLD
We maintain our HOLD rating on Alliance Financial Group Bhd
(AFG) with an unchanged fair value of RM5.30/share. Our fair value is based on
a 13.8% ROE for FY15F, leading to a fair P/BV of 1.8x. AFG’s 1QFY15’s
annualised net earnings was seemingly short of consensus estimates’ RM595.9mil
by 12.2% and ours by 12.5%. However, there was a MSS cost of RM10.6mil incurred
in this quarter.
Stripping off this one-off item, annualised net earnings
were 6.8% below consensus forecast and 7.2% below our estimates. The main
difference for us is the net interest income line, as we have modelled in total
interest rate hikes of 50bps in the subsequent quarters. Thus, the 1Q has not
yet fully reflected any positive impact from rate hikes.
The company registered strong annualised loans growth of
12.4%, in line with company’s targeted growth of 10%-11% for FY15F. We believe
strong loans growth was due to a faster turnaround time. In terms of loans by
purpose, loans growth was again mainly driven by the consumer segments, with
the residential mortgage segment recording annualised growth of 15.2% and
non-residential mortgage loans segment registering annualised loans growth of
26.9%.
Growth for loans to the SME segment were robust at 7.0% QoQ
in 1QFY15, and 19.9% YoY, driven mainly by purchase of non-residential
properties. There was a marginal rise in absolute gross impaired loans balance
at 2.2% QoQ in 1QFY15 but gross impaired loans were stable and unchanged at
1.4%. Thus, we consider the uptick to be in line with its loans growth. Loan
loss cover was stable at 90.2% in 1QFY15 when compared to 92.7% in 4QFY14. The
1Q results affirm AFG’s good growth momentum in both the consumer and SME
segments. We expect interest to sustain on the stock given the rising rate
environment as well as its strong asset quality. Maintain HOLD.
Others :
Mah Sing Group : After Southville, comes
Seremban BUY
Petronas Chemical : Plant turnarounds & lower product
spreads
HOLD
Malaysian Airports : Potential impact from MAS
restructuring HOLD
Plantation Sector : Palm oil inventory up 1.5% MoM in
July NEUTRAL
Economic Update : Factory output advances by 7.0% YoY in
June
QUICK TAKE
KL Kepong : Buys oleochemical company in
Belgium HOLD
NEWS HIGHLIGHTS
CIMB Group Holdings : CIMB, Mitsubishi set up joint venture
Malaysian Airline System : In new MAS template employees
told to brace for complete overhaul of airline
TSH Resources : TSH Resources proposes bonus issue
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