Friday, 24 February 2012

Analysts raise Alliance Financial share target

Published: 2012/02/23

KUALA LUMPUR: At least five research houses raised their target prices for Alliance Financial Group Bhd (AFG) after the country's smallest banking group posted slightly better-than-expected third quarter results.

The group, which owns Alliance Bank, saw net profit rise by 9.1 per cent to RM121.4 million.

This helped its nine-month net profit grow by 14.8 per cent to RM372.3 million, accounting for about 80.9 per cent of an analyst consensus estimate for the full year.

AFG's share price rose by 1.1 per cent to close at RM3.79 yesterday after HwangDBS Vickers Research, RHB Research, CIMB Research, TA Research and UOB Kay Hian raised their targets on the stock. Not all, however, had "buy" recommendations on it.

"We continue to like AFG for its attractive valuation and strong earnings visibility," said HwangDBS, which kept its "buy" call on the stock and raised its target by 20 sen to RM4.50.

AFG's improved nine-month earnings was supported by a strong growth in non-interest income - something the group is trying hard to grow as competition in the lending space intensifies - as well as Islamic banking and lower impairment charges.

"We believe that the group should be able to grow its non-interest income, which makes up 24.8 per cent of group net income and is on track to hit 30 per cent of overall income in the medium term. (This is) correlated to strong growth in fee income and investment income," OSK Research said in a report yesterday.

AFG had hinted at an analyst briefing two days ago that that a dividend upside surprise was unlikely to happen in the foreseeable future given that it needs to conserve capital to meet Basel III requirements, the research house added.

"Although Bank Negara Malaysia's new lending guidelines have reduced industry approval rates, given (AFG's) consistently stringent credit scoring process, its own approval rates are holding up albeit with some decline," Hong Leong Investment Bank Research said. It kept its "buy" call and target price of RM4.34 on the stock.

Read more: Analysts raise Alliance Financial share target

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