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Company Update – Alliance Financial Group (ADD, maintain) - Leveraging on the SME and consumer segments




Affin Hwang Investment Bank Bhd


24 Apr 2013





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Maintain ADD. Price Target lifted up to RM4.78 from RM4.43 We reiterate our ADD rating and lift our price target (PT) from RM4.43 to RM4.78 as we roll-forward our valuation horizon to CY14. Our price target is based on an unchanged P/BV of 1.6x, premised on CY14’s ROE of 13.2%, growth rate of 5% and cost of equity of 10.1%. Given the potential growth for AFG as a niche bank in the consumer and SME space, valuations still appear decent at CY13 and CY14 P/BV of 1.62x and 1.5x respectively. Overall, we keep our earnings forecasts unchanged for FY13-15. We continue to like AFG for: i) earnings visibility on the back of management’s clear strategies on loan growth, non-interest income expansion and preservation of asset quality; and ii) capital management and ROE improvement strategies.

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