We remain positive on Affin after yesterday’s FY10 results briefing. Although the rising external risks have injected some caution into management, management is still gunning for strong loan growth of 12-15% and an 80bp drop in the gross impaired loan ratio to 2.8% in 2011. This should more than offset the expected 10-20bp decline in net interest margin. We continue to forecast healthy net profit growth of 12.4% for FY11, mainly driven by the projected 11.4% increase at the topline. Given the favourable prospects, we reiterate our OUTPERFORM call. The potential share price triggers are (1) robust loan growth, (2) better-than-expected net interest margin, and (3) undemanding FY12 P/E of only 8.4x. We also retain our earnings forecasts and DDM-based target price of RM4.00.
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