KUALA LUMPUR: The disposal of Affin Bank Bhd's 63 per cent stake in asset management unit Affin Hwang Asset Management (AHAM) will help to fuel the group's key banking division endeavours, Kenanga Research said.

The firm said the sale of AHAM which would unlock RM1.54 billion in cash, would elevate Affin Bank's common equity Tier-1 (CET1) levels to 16 per cent from 13.7 per cent. 

"Post a meeting with the group at its recently-launched Tun Razak Exchange (TRX) headquarters, we are convinced of Affin achieving its ambitious financial year 2022 (FY22) targets with some resiliency against economic headwinds. 

"The group opines that it will ensure working capital targets are sufficiently fulfilled before it considers the quantum of special dividends that may be paid. 

"Of the RM1.54 billion proceeds, if we were to estimate a payout of 25 per cent to shareholders, this could translate to 18 sen in special dividends or 9.0 per cent yield while still keeping CET-1 level at 15.8 per cent," it said in a note today.

In addition, Kenanga Research said the disposal of stakes in AXA Affin Life and General to the joint venture (JV) with MPI Generali (estimated to be completed end-August 2022) would provide additional RM155 million cash while still being earnings accretive as an associate. 

"That said, operational integration of this JV is expected to only materialise by the first quarter (Q1) of FY23. 

"Post-merger, the combined gross written premium is expected to stand at RM2.0 billion, behind market leader Allianz Malaysia Bhd's RM2.35 billion book. 

"There could be a two-pronged growth enjoyed with Generali's non-cannibalistic product offerings on top of operational synergies from the merged entity, uplifting the segment's overall contribution to beat its historical 5.0 per cent of group earnings, going forward," it said.

Kenanga Research has maintained its "Outperform" call on Affin Bank, with an unchanged target price of RM2.45.