11% dividend yield against P/BV of only 0.4x
- As we expected, Affin declared a special dividend on 18 Oct, but the special DPS of 18 sen was smaller than the 22 sen we had estimated.
- Together with an interim DPS of 4.5 sen, the DPS declared on 18 Oct was 22.5 sen, translating to bumper dividend yield of 11.1%.
- Reiterate Add given its attractive dividend yield and for having the strongest loan growth among the Malaysian banks under our coverage.
Declared a special dividend of 18 sen per share…
On 18 Oct, Affin Bank declared a special dividend of 18 sen per share, arising from the extraordinary gain from the divestment of its stake in Affin Hwang Asset Management (AHAM). The special dividend was not a surprise to us as we had highlighted the possibility for this in our reports dated 19 Jul 22 and 24 Aug 22. However, the size of the special dividend was smaller than our estimate of 22 sen per share. The special dividend translates to an additional dividend yield of 8.9% for FY22F.
…plus interim dividend of 4.5 sen per share
On the same date, Affin also declared an interim DPS of 4.5 sen. Altogether, the total DPS declared was 22.5 sen, slightly higher than our previous DPS projection of 21 sen for FY22F. This translated to a bumper dividend yield of 11.1% for FY22F.
Upping DPS forecasts and target price
We raise our FY22F DPS forecast for Affin from 21 sen to 22.5 sen to match the total DPS declared on 18 Oct. Meanwhile, we also increase our DDM-based target price (TP) from RM2.31 to RM2.44 following the rollover of our valuation to end-2023F.
Reiterate Add on Affin in view of its compelling dividend yield
The special dividend (that lifts its FY22 dividend yield to an enticing 11.1%) and its strongest loan growth in the sector (we project 2022F growth of 10% for Affin vs. 5-6% for the banking industry), are the potential re-rating catalysts that underpin our Add call on Affin Bank.
Forecasting a turnaround in core EPS growth in FY23F
We project a turnaround in Affin’s core EPS growth from a decline of 19.4% in FY22F to an expansion of 23.1% in FY23F. The earnings drivers in FY23F would be (1) the absence of Cukai Makmur taxation that will lower its effective tax rate from 31.7% in FY22F to a normalised 24% in FY23F, and (2) our projection of a 9.8% drop in FY23F loan loss provisioning.