Thursday 28 Mar 2024
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KUALA LUMPUR (Oct 19): The announcement of a special dividend of 18.09 sen per share plus an interim dividend of 4.53 sen per share lifted Affin Bank Bhd's share price on Wednesday morning (Oct 19).

The banking stock has rebounded from its recent low of RM1.99 on Sept 30. As at 11.30am, Affin Bank, the country's smallest local bank in terms of market capitalisation, had shot up 19 sen or 9.41% to RM2.21, with a trading volume of 4.92 million shares, valuing the bank at RM4.89 billion.

Affin Bank announced on Tuesday it had proposed a variation of the utilisation of the proceeds it obtained from the sale of its 63% stake in Affin Hwang Asset Management Bhd for RM1.42 billion.

The total special dividend amounted to RM400.2 million, about 28.23% of the total proceeds of RM1.42 billion from the divestment.

The bulk of the proceeds, amounting to RM1 billion, will be allocated to fund Affin Bank’s banking activities and/or working capital requirements, while the remaining RM16.6 million will be utilised to defray fees related to the divestment.

“The proceeds from the divestment were originally intended to be utilised mainly to fund the Affin Bank group’s banking activities and/or working capital requirements.

“The proposed special dividend is intended to reward the shareholders of Affin Bank for their continuous support towards the group, after taking into consideration sufficient capital buffers for the group and reassessment of the group’s working capital requirements to catalyse substantial growth in its lending operations,” said Affin Bank in a bourse filing.

The divestment was completed in July. 

Six out of seven analysts tracking Affin Bank have a “buy” or “outperform” recommendation on the stock, while only one has a “hold” call, according to Bloomberg at the time of writing.

The analysts have given a consensus target price (TP) of RM2.39, with the TP ranging from RM1.90 to RM2.60.

CIMB ups TP for Affin Bank to RM2.44, despite smaller-than-expected 18 sen special dividend

CGS-CIMB deemed the 18 sen special dividend to be "smaller" than its estimate of 22 sen. The special dividend translated into an additional dividend yield of 8.9% for the financial year ending Dec 31, 2022 (FY2022).

Coupled with the 4.5 sen interim dividend that was also declared on Tuesday, total dividends declared rose to 22.5 sen, which translated into a yield of 11.1% for FY2022, wrote analyst Winston Ng.

“[As such], we raise our FY2022 dividend per share (DPS) forecast for Affin Bank from 21 sen to 22.5 sen to match the total DPS declared as of Oct 18. Meanwhile, we also increase our dividend discount model-based TP from RM2.31 to RM2.44, following the rollover of our valuation to end-2023.

“The special dividend that lifts its FY2022 dividend yield to an enticing 11.1% and its strongest loan growth in the sector (we project 2022 growth of 10% for Affin versus 5% to 6% for the banking industry) are potential rerating catalysts that underpin our 'add' call on Affin Bank,” he wrote.

Looking ahead, Ng projects a turnaround in Affin Bank’s core earnings per share from a decline of 19.4% in FY2022 to an expansion of 23.1% in FY2023. 

The earnings drivers in FY2023, he said, would be the absence of the one-off prosperity tax known as Cukai Makmur, which will lower the effective tax rate from 31.7% in FY2022 to a normalised 24% in FY2023, and the firm’s projection of a 9.8% drop in FY2023 loan loss provisioning.

Edited ByKathy Fong & Lam Jian Wyn
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