KUALA LUMPUR:CIMB Securities has raised its target price for Affin Bank Bhd with expectation that the Sarawak state government will deposit some RM4 billion into the bank next year.
On Friday, Affin announced that the state emerged as its single largest shareholder, with a 31 per cent interest, after Lembaga Tabung Angkatan Tentera (LTAT), and Boustead Holdings Bhd collectively sold their 26 per cent stake to the state's special purpose vehicle SG AssetFin Holdings Sdn Bhd.
"We believe there has been no significant deposit contribution from the Sarawak government over the past one year, despite the Sarawak government's initial acquisition of the 4.81 per cent stake last year."
"We are now assuming new current account savings account (Casa) potential in financial year 2025, of at least RM4 billion from the new major shareholder," it said.
The research firm said the move should correspondingly allow the release of more expensive fixed deposits.
It upgraded its fair value on Affin to RM4.30 from RM4 and maintained its "Buy" call on the bank.
Key catalysts are for the bank's stock are lower cost of funds; improving Casa mix; and normalisation in fixed deposit promotion rates.
Downside risks are worsening asset quality if domestic inflation picks-up; and ongoing elevated deposit competition.
Meanwhile on the transaction between the state government, LTAT and Boustead Holdings, CIMB Securities assumes the cost of the latest additional stake of 26 per cent to be around RM2.50 per Affin share or RM1.54 billion. Together with the earlier April 2023 initial stake of 4.81 at RM222m or RM1.97 per Affin share, it estimates that the Sarawak government's total cost for the 31 per cent stake amounts to RM1.76 billion.
It estimates Sarawak government's blended average cost for Affin stake would be RM2.42 a share.