PP 7767/09/2010(025354)

Malaysia
RHB Research
5 August 2010
Corporate Highlights Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

New s Upda te
5 August 2010
MARKET DATELINE

Affin Holdings Share Price

Fair Value
:
:
RM3.02
RM3.55
Expanding Into Indonesia 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 1.0 - 6.4 2.1 8.1
2010f 549.5 411.0 27.5 10.5 11.0 3.24 0.9 29.7 6.4 2.1 8.6
2011f 591.0 442.1 29.6 7.6 10.2 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

♦ Venturing into Indonesia. Affin announced yesterday it had entered into Issued Capital (m shares) 1,494.6
Market Cap (RMm) 4,513.6
the following agreements: 1) share purchase agreement with PT Kharisma
Daily Trading Vol (m shs) 1.6
Prima Karya for the acquisition of a 20.8% stake in Bank Ina Perdana’s
52wk Price Range (RM) 1.78 - 3.29
(Bank Ina) enlarged share base. The actual cash consideration will be
Major Shareholders: (%)
determined later, based on a P/NTA multiple of 3.15x of the latest month-
LTAT 35.7
end balance sheet (completion balance sheet); 2) subscription agreement
Bank of East Asia 23.5
of new shares representing 59.2% of Bank Ina’s enlarged share capital.
The subscription price will be based on the NTA/share as per the Boustead Holdings 20.7
completion balance sheet; and 3) a call and put option with PT Kharisma
FYE Dec FY10 FY11 FY12
for 18% of Bank Ina’s enlarged share capital. The option price shall be
EPS chg (%) - - -
based on a P/NTA multiple of 3.15x of Bank Ina’s future NTA/share.
Var to Cons (%) (7.3) (12.4) (11.5)

♦ Background of Bank Ina. Bank Ina is a small bank headquartered in

PE Band Chart
Jakarta. It has a network of 22 branches, sub-branches and cash offices
located in Jakarta, Bandung, Surabaya, Lumajang, Semarang, Solo and PER = 15x
PER = 12x
Yogyakarta. Bank Ina made a net profit of Rp13.3bn (RM4.7m) for PER = 9x
FYE12/09 while its net assets as at end-2009 was Rp111.8bn (RM39.7m). PER = 6x

Asset quality and capital ratios appear to be rather strong with the gross
NPL and RWCR at 0.44% and 23.5% respectively as at end-2009.

♦ Valuations. In our view, the P/NTA multiple of 3.15x accorded to the

share purchase agreement and option price appears relatively pricey as
compared to P/BV multiple of 2.47x done for the recent CIMB Niaga deal.
Relative Performance To FBM KLCI
However, after taking into account the subscription of new Bank Ina
shares, the blended P/NTA multiple would fall to around 1.69x (2x NTA,
assuming the call or put option is exercised immediately as well). This, we Affin Holdings
think, appears fair given Bank Ina’s relatively smaller size.

♦ Approvals and time frame. The proposals are subject to approvals from,
among others, BNM, Bank Indonesia and the shareholders of Bank Ina. FBM KLCI
The proposed acquisition and proposed subscription are expected to be
completed by 2Q2011 while the proposed option is expected to be
exercised two years after the proposed acquisition is completed.

♦ Forecasts. Assuming Bank Ina maintains its FY09 net profit going
forward, the impact of the acquisition would not be significant to the
group, by our estimates. In addition, we believe the acquisition is unlikely
to affect capital ratios materially given that the total cost and Bank Ina’s
size is not too significant (insufficient details to assess the impact further).

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

and is based on target CY11 PER of 12x. While Bank Ina’s small size means
that it may take the bank time before it becomes a major earnings
contributor to the group, the venture would allow Affin to gain a foothold in David Chong, CFA
(603) 9280 2186
Indonesia and provides the group a vehicle to expand its syariah banking
david.chong@rhb.com.my
business. Thus, we retain our Outperform call.

Please read important disclosures at the end of this report.

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 5 August 2010

Table 2 : Bank Ina’s Financial Highlights Table 3 : Bank Ina’s Existing Shareholding Structure
FYE 31 Dec Existing
2007 2008 2009 Shareholder no. of shares % stake
m %
PAT Rp ‘m 10,836.3 9,365.1 13,345.3 PT Kharisma 124.9 97.6
PAT RM ‘m 3.9 3.3 4.7 PT Media Interaksi Utama 2.1 1.6
Baktinendra Prawiro 1.0 0.8
ROE % 17.1 10.3 13.3 128.0 100.0
LD ratio % 72.4 87.8 81.3
Gross NPL ratio % 0.67 1.04 0.44
RWCR % 27.5 26.3 23.5
Source: Company

Table 4 : Transaction Details

No. Of Stake in Avg price Implied
Transaction shares Bank Ina / share Total cost Total cost P/BV*
‘m % Rp/share Rp ‘m RM ‘m x

Proposed acquisition of shares from PT Kharisma 65.28 51.0^^ 3,349^ 218,606^ 77.7^ 3.67^
Proposed subscription of new shares in Bank Ina 185.60 n.a. 914 169,638 60.3 1.00
(59.2% of enlarged share capital)
Sub-Total 250.88 80.0 1,548 388,245 138.1 1.69

Call and Put option representing up to 18% of Bank 56.49 18.0 2,879 162,632 57.8 3.15
Ina’s enlarged share capital
Total 307.37 98.0 1,792 550,877 195.9 1.96
*Based on Bank Ina’s 31 May 2010 unaudited net assets of Rp116,931m.
^Includes estimated capital gains tax payable of Rp30.7bn imposed on the vendor, which would be borne by Affin.
^^Prior to Bank Ina’s renounceable rights issue of 185.6m new shares. Affin will be entitled to subscribe for 94.66m rights shares and
90.94m rights shares that will be renounced by Bank Ina’s other shareholders in favour of Affin.
Source: Company

Table 5 : Earnings Forecasts Table 6 : 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

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IMPORTANT DISCLOSURES

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

Stock Ratings

Outperform = The stock return is expected to exceed the 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 KLCI benchmark (+/- five percentage points) over the next 6-12 months.

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

Industry/Sector Ratings

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

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

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

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