The counter surged 26 sen to RM3.73 in midday trade, before retreating to close five sen up at RM3.59, with 5.4 million shares changing hands.
Analysts said the surge in Affin could be fuelled by speculation that it was being considered as a takeover target by CIMB Group. The rise could also be due to the stock being a laggard in the banking sector, an analyst said.
“Affin tends to be overlooked given its small size and less exciting growth compared with the bigger banks. That has made the banking stock the cheapest among the nine local financial institutions of late.
“Coupled with speculation that it could be a takeover target of CIMB, these factors may have contributed to increased interest of some investors recently,” an analyst said.
Despite the recent surge, another analyst said Affin was among the cheapest banking stocks, as it was still trading at about one time price-to-book (PTB), while AMMB Holdings Bhd and RHB Capital Bhd were trading at about 1.8 times and 1.7 times PTB, respectively.
In the past few days, speculation was rife that a takeover of Affin by CIMB was on the cards. Subsequently, Affin jumped to RM3.47 on Jan 6, up 29 sen from RM3.18 the day before. The counter continued to climb in the past two days.
Meanwhile, CIMB also rose two sen to close at RM8.79 yesterday.
However, when asked to confirm the market rumours two days ago, Tan Sri Lodin Wok Kamaruddin, deputy chairman of Affin, told reporters he was not aware of the speculation. Sources close to CIMB had also quashed the rumour recently.
In a statement to Bursa Malaysia yesterday, CIMB said that it was not involved in any discussions relating to a possible acquisition or merger with Affin Bank or any of its related companies.
Industry observers said Affin did not come across as an attractive takeover target for CIMB Group, citing lack of synergy between the two banking groups.
CIMB is the second largest financial institution in the country in terms of assets and market capitalisation, after Malayan Banking Bhd, while Affin is the second smallest in terms of assets.
“It will be better for CIMB to acquire an overseas bank and enlarge its regional footprint,” a banker said. He said a better match for CIMB would be Public Bank Bhd, given the latter’s strong asset management businesses and consumer banking operations.
An industry observer said another factor to consider was whether the shareholders of Affin were keen to sell.
The banking group is controlled by the Armed Forces Fund Board (LTAT) with an about 50% stake, held directly and indirectly via Boustead Holdings Bhd. Affin’s second largest shareholder is Bank of East Asia Ltd, a Hong Kong-based lender with a 23.5% stake.
Interestingly, CIMB’s research team had come up with a bullish report on Affin two days earlier. CIMB Research maintained its “outperform” call on the banking stock with potential re-rating catalysts including above-industry loan growth, better-than-expected net interest margin and undemanding FY11 price-earnings ratio.
“We also take a positive view on the group’s acquisition of Bank Ina Perdana, which it intends to turn into an Islamic bank that will tap into the under-penetrated syariah market in Indonesia.
“Against the favourable backdrop, we retain our earnings forecasts and DDM (dividend discount model)-based target price of RM4.04,” it said.
CIMB Research said Affin was targeting loan growth of 12% to 15% per annum in financial year ending Dec 31, 2011 (FY11) to FY12, above the expected industry pace of 9% to 11%.
“This is also higher than our projected loan growth of 10% to 11% for FY11 to FY12,” the research house said. CIMB Research added that to get a larger slice of the pie, it would not compete on rates but instead, concentrate on delivering superior service and a shorter loan approval time as well as building its relationship with its customers and leveraging on its key strengths in small- and medium-enterprises financing.
Analysts said Affin had transformed into a more efficient and profitable bank in recent years. It is also seen to be expanding its size inorganically, via the acquisition of Indonesia’s Bank Ina.
Affin was in the spotlight last year when it expressed interest to acquire EON Capital Bhd. However, sources said the banking group did not officially place an offer for EON Capital, given that the former’s balance sheet was not big enough to take over the latter. - by Yong Yen Nie, theedgemalaysia.com
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