- At our recent company visit, AFG reaffirmed its overall
loans growth target of 14% to 15% for FY13F. There have been no significant
dips in its loan applications and approvals in recent months, which continue to
hold up well.
- For the business borrowers’ segment, AFG had earlier
experienced a slowdown with business borrowers turning cautious in
March-April 2012 and generally
undergoing inventory destocking activities.
Trade financing segment was also soft in the beginning of the year.
- However, we get the sense that the business borrowers’
segment has been relatively stable since then with business borrowers having
done some levels of restocking. This is positive as it may indicate no further
reduction in utilisation of working capital facilities.
- Net interest margin (NIM) is likely to continue to be affected by competitive pressure although
we believe AFG has not been aggressive in
terms of pricing generally. The guidance is a NIM compression of 10bps
YoY for FY13F. The company intends to boost CASA and transactional banking to
counter NIM pressure.
- The company is also maintaining its long-term target of
fee income ratio of 30%. - The company
alluded to no major signs of stress in
any particular parts of its loan portfolio. The company is currently
monitoring unemployment levels, as well as any particular increased usage of
credit cards and overdraft balances, but there have been no particular signs of
distress so far.
- The company’s credit cost guidance is 20bps, with some
positive impact expected from full adoption of FRS139 ahead.
- AFG’s share price has done well, with it now being close
to our fair value of RM4.40/share. Given the less than 15% upside to our fair
value, we are maintaining our HOLD rating.
Source: AmeSecurities
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