Affin : 9M Profits = 91% RHBRI’s Forecast – Cheapest

Valuations Outperform
3QFY09 Results

- 9MFY09 results almost full year forecast due to higher-than-expected NIM, non-interest income and lower-than-expected NPLs (despite the spike in 3Q).
- Surprise special dividend.
- Fourth consecutive quarter of elevated PBT on the back of expansion in NIM, , non-interest income and stable overheads. These were partly offset by higher LLP.
- Asset quality deteriorated as NPL formation jumped but all below 1Q and our original assumptions.
- FY09-11 forecasts raised by 18-30% to factor higher NIM and non-interest income as well as lower NPLs.
- New FY09 ROE projection (8.2%) is in line with management’s KPI of 8%.
- Although the latest spike in NPLs could deter investors’ interest, its valuations (single-digit PER and 20% discount to book) remain the lowest in our banking universe.
- Maintain Outperform. Fair value raised from RM2.38 to RM3.00 (unchanged 11x CY10 EPS or 5x discount to sector and benchmark PER of 16x to account for its weakest asset quality in our universe.