PETALING JAYA: There is now more clarity on AMMB Holdings Bhd
’s earnings trends over the next five years as its newly reveaked key aspirations for the period reflect the commitment of the bank to improve its financial performance.
The banking group unveiled its strategic focuses for its financial years 2025 (FY25) to FY29 at its Strategy Day event on June 19.
According to CGS International Research (CGSI Research), the most important takeaways are the bank’s three key aspirations for FY25-FY29.
These include improving its dividend payout, lowering its cost-to-income ratio to 40% from 44.2% in FY24 and improving return on asset (ROA) to 1.1% from 0.97% in FY24.
“AMMB expects a five-year compound annual growth rate (CAGR) of 15% in terms of dividend per share (DPS). AMMB expects its dividend payout to increase from 40% in FY24 to more than 50% in FY29, and possibly as high as 60%-70%, in line with the levels of some other Malaysian banks.
“If we assume its DPS will increase by 15% a year in FY25-FY27, the dividend yield of the stock would be at 6.2% in FY25, 7.2% in FY26 and 8.2% in FY27. Five-year net profit CAGR must exceed 8% for return on assets (ROA) of 1.1% in FY29,” the research house said.
CGSI Research shared that AMMB said it needed to record a five-year CAGR of more than 8% for its net profit from FY24 to FY29 to achieve ROA of 1.1% in FY29.
It pointed out that If AMMB manages to hit its targets, its net profit would be 7%-10% higher than forecasts for FY25-27.
The research house added that based on an asset-to-equity ratio of 10-11 times, AMMB stated that it would record return on equity (ROE) of 11-12% in FY29, if it manages to achieve an ROA of 1.1%.
“This is much higher than our ROE estimate of 9.2% for AMMB in FY29,” it added.
CGSI Research reiterated its “add” call on AMMB given its attractive valuation of 7.1 times calendar year 2025 price-earnings multiple, which is one of the lowest in the sector and below the sector average of 9.6 times.
“Re-rating catalysts include improved outlook on its net interest margin and potential partial write-back in its management overlay. Downside risks to our call are material deterioration in its loan growth and asset quality as well as elevation in deposit competition which could exert pressure on its net interest margin,” it added.
The research house also maintained its FY25-FY27 earnings per share forecasts and target price of RM5.06 for AMMB.
