KUALA LUMPUR: Kenanga Research says it will be surprised if Affin Bank Bhd is indeed selling its asset management arm Affin Hwang Asset Management Bhd.

The Edge Markets, quoting sources, reported that Affin had clinched a cash deal to sell Affin Hwang AM for RM2.3 billion to RM2.6 billion.

Private equity fund CVC Capital Partners was among the interested parties wanting to take over Affin Hwang AM, whose asset under management has grown to RM81 billion as at end-2021.

Kenanga Research analyst Clement Chua said it would be a surprise move as Affin's initial expectations was for it to spin off Affin Hwang AM, its crown jewel.

Chua said the price tag of RM2.3 billion-RM2.6 billion translated to a financial year 2020 (FY20) 24-27x price to earnings (PER) and 15-17x price to book value (PBV).

He said the valuation seemed very generous, as Kenaga Research reckoned in the event of a spin off, a target market cap of RM2 billion could be more likely at 20x PER.

"Regardless, this above the group's 2014 acquisition price of Hwang-DBS Investment Bank Bhd and its asset management arm at RM1.36 billion. As it is not officially announced, we can only suspect that the rationale for the transaction is to embolden the group's strategies in accelerating its financing market share and to fuel capital needs," he said in a report today.

Kenanga Research has maintained its "Market Perform" call on Affin, with an unchanged target price of RM1.55.