HLIB upgrades Affin Bank to ‘buy’

KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) has turned bullish on Affin Bank Bhd given strong likelihood of value unlocking for Affin Hwang Asset Management Bhd in the near term, potential divestiture of its insurance units and the possibility of special dividends.

HLIB is looking at a generous dividend yield of 27 per cent.

Besides, the Covid-19 vaccination rollout and the recovery of the economy will drive a better showing at Affin’s banking operations, which have shown signs of bottoming out.

“Moreover, Affin’s current price point is attractive and it is a laggard in the banking sector. Although we were critical of its asset quality and low ROE (return on equity) previously, the riskreward profile seems more favourable now,” HLIB said in a report yesterday.

HLIB has not made changes to Affin’s financial years 2021 and 2022 profit forecasts and has introduced financial year 2023 estimates.

HLIB also upgraded Affin to a “buy” with a higher target price of RM2.25 from RM1.85 previously.

HLIB said Affin was one of the poor-performing banks under its coverage as its share price had fallen five per cent year-to-date.

“Hence, we reassess our investment thesis and its risk-reward profile,” it added.

The firm sees a high chance that Affin’s 63 per cent-owned Affin Hwang Asset would go for listing in the next one to two years.

Affin Hwang Asset could fetch RM1.4 billion market capitalisation against an asset under management of RM76 billion.