SECTOR FOCUS OF THE DAY
Banking Sector: 4Q17 Earnings Review: Improving asset quality OVERWEIGHT
4Q17 sector core earnings slipped 3.3%QoQ after excluding Maybank's one-off gains of RM185mil from the disposal of property, plant & equipment. Also, the decline was attributed to AMMB's higher provisions due to normalising credit cost, RHB Bank's prudential RM104mil impairment on bonds related to the oil & gas sector in Singapore and CIMB's lower earnings due to higher operating expenses and allowances for other impairment losses.
Maybank and Hong Leong Bank’s earnings were above our expectations. Public Bank, RHB Bank, CIMB and ABMB's results were in line while AMMB’s earnings were short of consensus expectation. We have raised our earnings projection for Maybank and Hong Leong Bank by 7.5% and 2.5% respectively after stronger-than-anticipated earnings. For CIMB, our forecast earnings are increased by 2.9% after fine-tuning our assumptions for CI ratio and credit cost.
Our projection for the sector's core earnings growth for CY18 is now lowered to 9.3% compared to 10.1% previously. This is due to the higher earnings base of CY17 after the completion of the 4Q17 results. We maintain our OVERWEIGHT stance on the sector with BUY calls on RHB Bank (FV: RM6.30/share), Public Bank (FV: RM24.30/share) and Alliance Bank (FV: RM4.40/share).
QUICK TAKE
Plantation Sector: Key takeaways from palm oil conference – Day 2 NEUTRAL
ECONOMIC HIGHLIGHT
Malaysia: 20% chance of another OPR hike
NEWS HIGHLIGHTS
Insurance Sector: Prudential’s Malaysia unit said in talks with KWAP to sell 30% stake
iDimension: Plans capital reduction
Hibiscus: Australia JV gets extension
JAKS: Agrees to complete Tower A by June 30
DISCLAIMER:
The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd. Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmBank Group Bhd and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice.
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