Technical tracker - HLIB Retail Research – 7 Feb 2022 AFFIN: | HLeBroking

Technical tracker - HLIB Retail Research – 7 Feb 2022

AFFIN: Values resurface in light of decent 4Q21 results and potential special dividend

Values resurface after recent slide. Following Affin’s confirmation on 28 Jan of its entire 68.35% stake sale in Affin Hwang Asset Management Bhd (AHAM) to CVC Capital Partners for RM1.4bn cash, the stock tumbled 14.6% from a 52-wk high of RM2.06 (27 Jan) to a low of RM1.76 (a tad above 200D MA near RM1.73) before closing at RM1.82 last Friday. The slide could be attributed to concerns that 1) the disposal could result in a relatively sharp drop in group ROE to 3.0% from 4.5% as AHAM’s contribution to group earnings which is relatively prominent at ~25%, and 2) investors locked in profit as the stock had already rallied 27% from a 52-week low of RM1.62 to a high of RM2.06 amid market expectations of value unlocking for AHAM in the near-term.

HLIB maintains BUY and GGM-TP of RM2.25.Although there is an earnings gap post-AHAM disposal, we prefer to view the glass half full as the monetization of AHAM would have in effect frontload 10 years’ worth of its profit. Moreover, Affin will be left with slews of business levers to explore and potentially, shareholders could be rewarded with special dividends (every RM100m payout or 2.6% dividend yield may lift ROE by 4bp). Overall, the selling seems overdone, reflected by 1) undemanding valuations at 8.x FY22 P/E (26% below peers and 0.40x P/B (60% below peers) and 2) banks remain the best proxy for the economic recovery and rate hike cycle.

Likely to bottom-up following a Tweezer bottom formation.Affin may have formed a Tweezer bottom after establishing a low of RM1.76 on 31 Jan & 3 Feb before recovering to RM1.82 (above the 31 Jan & 3 Feb high of RM1.81) on 4 Feb. The pattern indicates that the pullback is likely over, and a decisive breakout above RM1.86 (mid BB) may spur further upside towards RM1.91-2.00-2.16 zones. Cut lost at RM1.70.

Collection range: RM1.73-1.76-1.82

Upside targets: RM1.91-2.00-2.16

Cut: RM1.70


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