PP 7767/09/2010(025354)

14 July 2010

Malaysia Corporate Highlights

RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

New s Upda te
14 July 2010
MARKET DATELINE

Affin Holdings Share Price

Fair Value
:
:
RM3.00
RM3.55
Legal Suit May Dent Upcoming 2QFY10 Results Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (AFFIN; Code: 5185) Bloomberg: AHB MK

Net EPS Net Net
FYE PBT Profit EPS Gwth PER Book P/Book C.EPS* DPS Div Yld ROE
Dec (RMm) (RMm) (sen) (%) (x) (RM/s) (x) (sen) (sen) (%) (%)
2009 497.2 371.8 24.9 27.0 12.1 3.17 0.9 - 6.4 2.1 8.1
2010f 549.5 411.0 27.5 10.5 10.9 3.24 0.9 29.7 6.4 2.1 8.6
2011f 591.0 442.1 29.6 7.6 10.1 3.31 0.9 33.8 6.4 2.1 9.0
2012f 633.2 473.6 31.7 7.1 9.5 3.39 0.9 35.8 6.4 2.1 9.5
Main Maket Listing / Trustee Stock / Non-Syariah-Approved Stock By The SC * Consensus Based On IBES Estimates

♦ Incurs RM48.2m sum on legal suit ... Affin announced yesterday that Issued Capital (m shares) 1,494.4
Market Cap (RMm) 4,483.1
pursuant to the decision of the High Court on a legal case (details below),
Daily Trading Vol (m shs) 1.6
it had paid a total of RM48.2m to Maybank. 52wk Price Range (RM) 1.59 - 3.29

♦ … due to dispute in ownership of collateral. This is a long outstanding

Major Shareholders:
LTAT
(%)
35.7
case (initiated in 2000) relating to a dispute between Maybank’s
Boustead Holdings 20.7
predecessor-in-title, PhileoAllied Bank, and Affin’s predecessor-in-title, BSN
Bank of East Asia 21.2
Commercial Bank, with regards to rights over a mutual customer’s
collaterals that consist of shares. In Nov 2002, the High Court ruled that FYE Dec FY10 FY11 FY12
Maybank had priority over the shares and Affin had to deliver the shares or EPS chg (%) - - -
payment of the proceeds if the shares had been sold. Maybank then Var to Cons (%) (7.3) (12.4) (11.5)

proceeded with an application for monetary judgement and on 31 May

PE Band Chart
2010, the High Court allowed Maybank’s application for monetary
judgement and Affin was ordered to pay RM30m together with interest
from Dec 2002. Affin complied with the High Court’s ruling and paid the PER = 15x
PER = 12x
abovementioned amount, although we also note that Affin has also PER = 9x
PER = 6x
appealed against the ruling and is currently waiting for a hearing date.

♦ Risks. The risks include: 1) slower-than-expected loan growth; 2)

deterioration in asset quality; and 3) changes in market conditions that
may adversely affect investment portfolios.
Relative Performance To FBM KLCI
♦ Forecasts. According to Affin’s 1QFY10 results announcement, no
provision had been made with respect to this court case. Hence, a
Affin Holdings
provision for the RM48.2m (or 3.2sen/share) could be incurred in the
upcoming 2Q results. While this charge could impact our FY10 net profit
forecast by 11.5% (8.8%, if amount is tax deductible), we are keeping our
earnings forecasts unchanged as we view this as a one-off charge.
FBM KLCI

♦ Investment case. Our indicative fair value of RM3.55 remains unchanged

and is based on target CY11 PER of 13x. With better consistency in
earnings over the last six quarters as well as improvement in asset quality,
the Group’s prospects appear bright, in our view. We see a potential for
recurring earnings to surprise on the upside ahead and this could come
from stronger-than-expected loan growth (management targets FY10 loan
growth of 13-15% vs. our 8.3% assumption) and/or lower-than-expected
impairment allowances on loans as asset quality improves. Thus, no
change to our Outperform call on the stock.

David Chong, CFA

Please read important disclosures at the end of this report. (603) 9280 2186
david.chong@rhb.com.my

A comprehensive range of market research reports by award-winning economists and analysts are exclusively Page 1 of 2
available for download from www.rhbinvest.com
 14 July 2010
Table 2. Earnings Forecasts Table 3. Ratio Analysis & Forecast Assumptions
FYE Dec (RMm) FY09 FY10F FY11F FY12F FYE Dec FY10F FY11F FY12F

Net Interest Income Asset Quality (%)

(+ Islamic Banking) 969.9 1,034.7 1,083.1 1,139.0 Gross NPL 2.91 2.61 2.31
Non-interest Income 304.3 319.6 335.5 352.3 Net NPL 1.74 1.58 1.40
Operating Income 1,274.2 1,354.3 1,418.7 1,491.3 SP / NPL 41.00 40.00 40.00
GP / Net Loans 1.50 1.50 1.49
Less: Overhead Loan Loss Coverage 91.85 96.69 104.06
Expenses -604.5 -634.7 -666.5 -699.8 Core Capital Ratio 12.08 11.60 11.21
Pre-provision RWCAR 13.25 12.78 12.42
Profit 669.7 719.6 752.2 791.5
Margins (%)
Less: Loan Loss Yields On Earnings Assets 4.11 4.11 4.11
Provisions -185.1 -182.9 -174.3 -171.6 Avg. Cost Of Funds 2.03 2.03 2.03
Operating Profit 484.7 536.7 578.0 619.9 Interest Spread 2.08 2.08 2.08
Un-adj NIM (ex-Islamic Inc) 2.23 2.19 2.16
Associates 12.5 12.7 13.0 13.3 Adjusted NIM (+Islamic Inc) 2.67 2.62 2.59
Pretax Profit 497.2 549.5 591.0 633.2
Profitability (%)
Less: Tax -125.3 -138.5 -148.9 -159.6 ROE 8.59 9.03 9.46
Effective Tax Rate 25.2 25.2 25.2 25.2 ROA 0.99 0.99 0.99
(%) Cost / Income Ratio 46.87 46.98 46.92
Profit After Tax 371.8 411.0 442.1 473.6 Expenses / Avg. Assets 1.53 1.48 1.45
Provisions / Avg. Net Loans 0.78 0.69 0.63
Minorities 0.0 0.0 0.0 0.0
Net Profit 371.8 411.0 442.1 473.6 Liquidity (%)
Source: Company data, RHBRI estimates Loan Deposit Ratio 77.47 76.85 76.91
Net / Gross Loan Growth 8.33 8.11 8.08
Deposit Growth 10.00 9.00 8.00
Source: RHBRI estimates

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The opinions
and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or be contrary
to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be construed as an
offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any manner whatsoever
and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons may from time to time
have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of
persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy
will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts any liability for
any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB Group
may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity securities or loans
of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other services
from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based upon
various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more over
a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended securities,
subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

A comprehensive range of market research reports by award-winning economists and analysts are exclusively Page 2 of 2
available for download from www.rhbinvest.com