Monday, November 14, 2011

MIDF Research initiates coverage on AFG with TP of RM3.84

KUALA LUMPUR (Nov 14): MIDF Research has initiated coverage on ALLIANCE FINANCIAL GROUP BHD [] at RM3.40 with a Buy rating and target price (TP) of RM3.84.

In a note Monday, Nov 14, MIDF Research said that having taken into account AFG's lower loan growth rate (which results in a lower LD ratio compared to peers) and weaker IB business unit, the research said it was expecting ROEs of 12.8% and ROE of 12.0% for FY12 and FY13 respectively.

'Despite the above drawbacks against peers, the stock is attractive with a TP of RM3.84 which is based on PBV ratio of 1.5x to FY13 BVPS. PBV ratio of 1.5x is lower compared to the average for the five banking stocks under our coverage (excluding Public Bank which has always been on the higher PBV ratio than peers) of 1.8x.

'Our TP of RM3.84 equates to PER of 12.4x. As the expected total return of the stock is slightly above 15%, we are assigning a BUY recommendation. Our valuation has taken into account weaker non-interest income for FY13 due to softer capital market and a slower expected economic growth,' it said.


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