KUALA LUMPUR (June 20): Hong Leong Investment Bank Bhd (HLIB) has reiterated its ‘buy’ call on AMMB Holdings Bhd’s (KL:AMBANK) shares after the banking group revealed its business plan for the next five years.
It said that AMMB’s strategies are fairly compelling and the group have levers to pull to achieve its financial year 2029 (FY2029) financial aspirations.
“Overall, there are no changes to our forecasts. We still see favourable risk/reward profile for the stock as valuations remained relatively undemanding,” it said.
HLIB also maintained its target price (TP) for AMMB at RM4.60 per share.
In its five-year business plan, the banking group has outlined its strategies, which include its expectation for its business banking division to be a significant earnings growth driver in the near future.
Targets for its business banking unit include a 12% loan growth; improving its small and medium enterprises (SME) market share to 9.1% from the current 7.2% by FY2029; a five-year income compound annual growth rate (CAGR) of 10% from RM1.62 billion in FY2024 and a five-year net profit CAGR of 13% from RM665 million in FY2024.
Meanwhile, in a separate note, Maybank Investment Bank Bhd (Maybank IB) has also maintained its ‘buy’ call on AMMB, with a TP of RM4.36 per share.
It noted that AMMB’s business banking unit is targeting further geographical expansion into states such as Penang, the Klang Valley and the Southern Region.
“Expansion into East Malaysia is also on the cards, as is its evolution into a one-stop centre for foreign direct investment flows, particularly from China and Korea,” Maybank IB said.
Meanwhile, MIDF Amanah Investment Bank (MIDF) maintained its neutral view on AMMB’s five-year plan, noting that despite its lofty targets, the plan is safe and does not take large risks.
“AMMB’s management has a record of good execution. All eyes are on the new chief financial officer, Shafiq Abdul Jabbar.
“The group’s loan growth target is moderate and realistic and is unlikely to put significant pressure on funding – one aspect that AMMB is weak at,” it added.
However, MIDF said that AMMB’s return on equity target of 12%-13% may be difficult to achieve with a high base Gross Impaired Loan (GIL) ratio of 1.6% and no overseas presence.
“It’s a lofty goal. While AMMB seems solid on an execution front, we think this is difficult to achieve without lowering its GIL ratio to that of its best-performing peers,” it said, maintaining its TP for AMMB’s shares at RM4.75 per unit.
At the same time, Kenanga Investment Bank Bhd retained its ‘outperform’ call on AMMB, with a TP of RM5.20.
“We continue to believe that AMMB is still in a better shape for consolidation. The group may now be in a better position to deliver better dividend payouts of 40% from 35%, which we are anticipating.
“It is also one of the leaders in terms of the SME profile, which is touted as a high-growth segment that could accelerate market share growth for the group should we anticipate better economic prospects in the medium term,” it said.
Echoing the positive sentiment, RHB Bank Bhd has also maintained its ‘buy’ call on AMMB, raising the TP to RM5.50 from RM4.90 previously.
“We raised the banking group’s FY2025-FY2027 net profit projection by 3%-6% as we assume greater net interest margin expansion and loan growth,” it added.
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