AMBANK: Waiting For The Tide To Turn

Background

AMMB Holdings Berhad or also known as AMBANK is a financial services group in Malaysia whose core businesses are retail banking, wholesale banking, islamic banking, and life and general insurance.

Historical Financial Performance

From the graph below, we can see that AMBANK enjoyed strong growth after the Global Financial Crisis ended in 2009. Its earning peaked in 2015.


Graph 1: AMBANK's last 10 years' Financial Performance

The decline in earnings could have bottomed. The past 6 months' results shows a slight uptick!


Graph 2: AMBANK's Financial Performance for the last 10 half-years

Recent Financial Result

Looking at the table below, we can see that the last 2 quarters' earnings (QE30/9/2016 & QE30/6/2016) are better than the earnings from the immediate preceding quarters (QE31/3/2016 & QE31/12/2015). There is a good chance that the earnings would continue to improve going forward.


Table: AMBANK's last 8 quarterly result


Graph 3: AMBANK's last 12 quarterly result

Valuation

AMBANK (closed at RM4.18 yesterday) is now trading at a PER of 10x (based on last 4 quarters' EPS of 41.72 sen). At this PER, AMBANK is deemed fairly valued.

Technical Outlook

AMBANK has lost about 50% of its 2013 high of RM8.00 to its recent low of RM4.00. It is now trading not very far from the support of its long-term uptrend line at RM3.50. In fact, the stock has strong support from the cluster of horizontal lines between RM4.00-4.50.


Chart 1: AMBANK's monthly chart as at Dec 8, 2016_10.30 (Source: ShareInvestor)

The weekly chart shows AMBANK had been hoovering around the RM4.20 level for more than a year. Due to poor sentiment, it broke thru that support and tested the support at the horizontal line at RM4.00. It even broke the RM4.00 mark briefly in late October before recovery. The pattern (ABCD) we see is similar to a falling wedge where a breakout to the upside at RM4.30 could signal the end of its 3 years' bear run. Watch out for that!


Chart 2: AMBANK's weekly chart as at Dec 8, 2016_10.30 (Source: ShareInvestor)
 
Conclusion

Based on possible recovery in earning and fair valuation, AMBANK could be a good stock to consider for a recovery play. However it must be noted that the stock is still in a downtrend and recovery would only begin if it can convincingly break above the RM4.30 mark.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.