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Wednesday, March 08, 2017

AFG: Recovery May Begin Soon

Results Update

AFG's result for QE31/12/2016 (3Q17) was released on February 22. It reported a lower net profit which dropped 2% q-o-q or 4% y-o-y to RM130 million. Revenue rose 5% q-o-q & y-o-y to RM379 million.


Table: AFG's last 8 quarterly results


Despite earnings dropped marginally q-o-q, the bank highlighted the following key performance indicators:
1. Net interest income grew by RM9.5 million due to drop in interest expense. COF was lower by 8bps. Net Interest Margin recorded at 2.31%.
2. Other operating income increased by RM9.4 million, mainly from realized and unrealized gain from financial instruments and derivative and FX income.
3. Other operating expenses increased by RM7.0 million or 4.2%, mainly from administrative and establishment costs.

Graph 1: AFG'ss last 22 quarterly results

Despite the challenging operating environment in the past 2 years, AFG was able to maintain earnings at an even keel. This attests to its relatively conservative management philosophy.


Graph 2: AFG's last 13 yearly results

Valuation

AFG (closed at RM4.03 yesterday) is now trading at a trailing PER of 11.7x (based on last 4 quarters' EPS of 34.4 sen). At this PER, AFG is deemed fairly valued.

Technical Outlook

AFG broke above its long-term downtrend line, RR at RM3.95-4.00 yesterday. With this breakout, AFG could be on the way to its next upleg.


Chart 1: AFG's weekly chart as at Mar 7, 2017 (Source: MalaysiaStock.biz)

AFG tested its long-term uptrend line, SS at RM3.30 in early 2016.

  
Chart 2: AFG's monthly chart as at Mar 7, 2017 (Source: ShareInvestor.com)

Conclusion

Based on satisfactory financial performance & bullish technical outlook, AFG could be a good stock for a recovery play.

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.

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