FW: AmBank Research - Hong Leong Financial Group : Stronger earnings expected from all key divisions BUY, 26 Jan 2018

 

 

STOCK IN FOCUS

Hong Leong Financial Group : Stronger earnings expected from all key divisions                 BUY

 

We maintain our BUY call on Hong Leong Financial Group (HLFG) with a higher fair of RM19.40/share (previously: RM17.70/share). This is based on an increase in our SOP valuation after factoring in a higher valuation for Hong Leong Bank (HLBB) by rolling over to FY19 numbers.

 

On HLFG's 64.4%-owned subsidiary, Hong Leong Bank's (HLBB), we project its earnings to improve by 6.8% in FY19with a lower provision from its associate, Bank of Chengdu (BOC) and higher net interest income (NII) underpinned by the rise in OPR and loan expansion. BNM has raised the OPR yesterday by 25bps from 3.00% to 3.25% on the grounds that the degree of monetary accommodation be normalised. We now expect another rate hike of 25bps in 2H2018 which will move the OPR back to 3.5%. Based on our assessment, every 25bps increase in interest rate will lift HLBB's net profit by 1.3%. For housekeeping, we have tweaked our net profit estimates for FY18/FY19/FY20 by -2.3%/0.9%/0.4% after fine-tuning our projections for non-interest income.

 

Other reports

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Telco Sector : Making sense of Axiata-TM potential merger                                                         NEUTRAL

 

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ECONOMIC REPORT

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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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