EVEN after factoring in cukai makmur (windfall tax), AMMB Holdings Bhd remains attractive from a valuation and earnings per share (EPS) perspectives.
In justifying its “add” rating on the banking group, CGS-CIMB Research said AMMB’s valuation of 6.6 times CY 2022F price-to-earnings ratio (P/E) is significantly lower than the sector’s 11.8 times (also the lowest in the sector).
“The potential re-rating catalyst is EPS recovery with our projected core EPS growth of 35.1% in FY3/2022F and 14.2% in FY3/2023F driven by improved loan loss provision (LLP) and expansion in net interest income,” opined analyst Winson Ng in a results review.
“We retain our FY3/2022-FY3/2024F EPS forecasts and dividend discount model (DDM)-based target price of RM3.64.”
While AMMB’s 1H FY3/2022 net profit of RM707.6 mil did not reflect the cukai makmur, CGS-CIMB Research has factored the windfall tax into its projected FY3/2022F net profit for AMMB.
In fact, the bank’s 1H FY3/2022 net profit rose 17.4% year-on-year (yoy) due to LLP declining 12.7% yoy and overheads falling 5.1% yoy.
“Factoring in cukai makmur, we estimate AMMB’s 1H FY3/2022 net profit to be at RM620 mil which accounted for 45.5% of our full-year forecast and 49.2% of Bloomberg consensus estimate,” noted the research house.
“We regard this as in line with expectations in anticipation of higher 2H FY3/2022F net profit arising from lower LLP. The negative surprise for the 2Q FY3/2022 results was the absence of interim dividend.”
AMMB stated that it skipped the interim dividend and will decide on the full-year dividend once it finalises the 4Q FY3/2022F results as it is wary about the earnings risks from the interest exemption for B50 borrowers.
Moving forward, AMMB said it will factor in the additional taxation under cukai makmur in 2H FY3/2022F.
“If this is captured in 3Q FY3/2022F, it estimates that total cukai makmur taxation will be RM100 mil (for 9M FY3/2022F), translating into annualised cukai makmur taxation of RM133.3 mil in FY3/2022F which is close to our estimate of RM134.7 mil,” added CGS-CIMB Research.
Elsewhere, TA Securities Research lowered AMMB’s target price to RM3.40 (from RM3.70 previously) while retaining its “hold” rating in view of profit adjustment from cukai makmur.
“We maintain broad key assumptions but raised the tax rate in FY3/2022 to account for cukai makmur,” noted analyst Li Hsia Wong. “With that, we adjusted our FY2022/2023/2024 net profit forecast to RM1.18 bil/RM1.54 bil/RM1.83 bil from RM1.36 bil/RM1.54 bil/RM1.83 bil previously.”
At 11.03am, AMMB was down 7 sen or 2.22% at RM3.08 with 2.51 million shares traded, thus valuing the company at RM10.21 bil. – Nov 29, 2021
