K&N Kenanga has made a “outperform” recommendation for Alliance Bank Bhd with a higher TP of RM3.60 (from RM3.25) on better GGM inputs as it is one of the top picks for 1QCy22.
It said that the group’s medium-term fundamentals appear to be comparable, if not better than some of its larger-cap peers.
On the flip side, it said that its dividend payout assumptions are rather conservative (at 40%, below pre-Covid levels of c.50%)
Assuming we are out of the woods, the research house said that it is possible for the stock to deliver positive earnings surprises in the coming years.
It said that the group could deliver strong earnings and dividend surprises should recovery be better than expected. “The stockbroking house said that that the loans growth is expected to be favourable in the near-term while riding on well-positioned strategies,” the stockbroking house said
The research house said that spotted the group for its high exposure to the SME segment, which constitutes >30% of its books.
K& N Kenanga said that in line with the economic recovery, this segment is primed to benefit as business loans demand improves on reinvigorated working capital needs.
“Expansionary-driven demand could materialise if the business landscape turns more favourable than expected. Meanwhile, household loans may be further fuelled as income prospects become more sustainable in 2HCY22.
At present, our FY23E loans growth projection of 5% is in line with our CY22 industry-wide expectation,” the stockbroking house said.
In December 2021, the group announced that it is disposing its stockbroking business to Philip Futures for an expected consideration of c.RM300m.
The segment had previously contributed <3% to group PBT and its disposal is not expected to translate to meaningful income loss or cost efficiency gains.
