AmBank rebounds to late Aug high of RM4.46, more upside seen

KUALA LUMPUR: Shares of AmBank Bhd jumped to RM4.46, the highest since late August, as it continues riding on business recovery and as it pursues pursue organically its Top 4 aspiration by 2020.

At midday on Thursday, it was up 11 sen to RM4.46.  The FBM KLCI was down 1.24 points or 0.07% to 1,784.83.

Hong Leong Investment Bank (HLIB) Research said AmBank’s share price had slumped to a year-to-date low of RM4.27 after the proposed RHB Bank-AmBank merger talks ceased. 

To recap,  on May 3,  AmBank’s share price rose to 52-week high of RM5.56 (on May 3) amid rumours of merger talks to create the 4th largest banking group in Malaysia if materialised. 

However, share prices slid to a low of RM4.27 on Sept 5 before closing at RM4.35 on Wednesday  following the termination of the merger negotiation as both parties were unable to reach conclusion over various terms, among others pricing and synergies.

HLIB institutional research has a Buy rating with a TP of RM5.20, a 19.5% upside. 

“Despite the scrapped merger deal, we see AmBank continues riding on business recovery and will pursue organically its Top 4 aspiration by 2020,” it said.

After the recent selldown, AmBank is currently trading at steep discount of 0.8 P/BV, 41% lower as compared to peers’ price-to-book value of 1.36 times.
On a price-to-earnings basis, AmBank’s FY18 P/E of 9.5 times is also trading at 21% discount against its peers’ 12 times.

“Poised for further rebound amid signs of bottoming up. Overall, we see limited downside risks for AmBAnk in the short term, supported by undemanding valuations, bottoming up technical readings and strong dividend yield of 5.2% projected for FY18-20.

“Following the successful reclaim above 10-day simple moving average (SMA) at RM4.31), the stock is likely to advance further towards RM4.47 (20-day SMA) and long term resistance at 200-day SMA near RM4.65 levels. 

“A decisive breakout above RM4.65 will spur prices higher to long term objective at RM4.82 (30-week SMA). On the flip side, key supports are RM4.26 and RM4.15 (daily lower Bollinger band). Cut loss at RM4.13,” said HLIB Research.