AMMB upgraded to buy as earnings outlook remains strong

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AMMB upgraded to buy

Highlights

AMMB is expected to post net profit of RM557 million for the quarter ended September and RM2.15 billion in FY2027.
Hong Leong Investment upgraded AMMB to 'buy' with a RM7.00 target price, expecting an interim dividend of 15 sen per share and a 6.5% dividend yield.
AMMB shares have fallen more than 14% from their August record high to RM6.30, but the decline is seen as offering a more attractive risk-reward profile.

This article was translated from the original. Read the original version by our correspondent here.

Earnings outlook and new rating

As reported by The Edge Malaysia, citing Hong Leong Investment Bank, AMMB is expected to post net profit of as much as RM557 million for the quarter ended September, putting it on track to record RM2.15 billion for FY2027.

The research firm upgraded the stock to "buy" on Wednesday, just around a month after downgrading its recommendation to "hold", while raising its target price by 20 sen to RM7.00. It said resilient earnings performance leaves room for an interim dividend of around 15 sen per share, keeping AMMB on track to meet its 60% payout ratio target for FY2027 and deliver a 6.5% dividend yield.

Hong Leong Investment also believes pressure on asset quality remains modest, helping to support earnings even as competition for deposits intensifies and could drive up funding costs.

Market pressure and risk-reward profile

AMMB shares have fallen more than 14% from their record high in August to RM6.30 on Wednesday, as banking stocks were hit by rising U.S. interest rates and a subsequent increase in government bond yields. JPMorgan’s downgrade earlier this month also added to the pressure on sentiment.

Higher bond yields typically weigh on banks because they reduce the value of bond holdings, increasing paper losses that can pressure capital and force losses to be recognised if the bonds are sold. Investors may also demand higher returns on corporate bonds, which can dampen appetite for new issues and advisory fees.

Even so, Hong Leong Investment sees the recent share price decline as creating a more attractive risk-reward profile and a buying opportunity on weakness ahead of more meaningful re-rating catalysts. The firm also cited a RM2 billion capital return programme starting in FY2028, while Bloomberg data show that 12 of the 17 research firms covering the stock now recommend "buy", with an average target price of RM7.49.

In our earlier report on the weakness in the stock market in Malaysia, we highlighted the FBM KLCI trading lower as concerns over inflation and the U.S. interest rate outlook weighed on sentiment. We also noted that technology and AI stocks were under selling pressure, while foreign fund flows remained weak amid a continued streak of net selling, putting U.S. economic data in the market spotlight.

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