Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on August 29, 2018

BIMB Holdings Bhd
(Aug 28, RM3.96)
Maintain buy with an unchanged fair value (FV) of RM5.40:
We maintain our “buy” call on BIMB Holdings Bhd with an unchanged FV of RM5.40 per share. Our FV is based on a financial year 2019 return on equity of 12.8% leading to a price-to-book value of 1.7 times. We fine-tune our estimates by adjusting our FY18/FY19/FY20 net profit by 2.6%/3.2%/-0.1% as we tweak our cost-income ratio and loan-growth assumptions.

BIMB’s net profit for second quarter of FY18 (2QFY18) came in at RM150 million (-12.9% quarter-on-quarter [q-o-q], +10.5% year-on-year [y-o-y]). This led to earnings of RM322 million (+12.3% y-o-y) for first half of FY18 (1HFY18), which were within expectations, making up 52.4% of our and 50.7% of consensus estimates. Total revenue grew 7% y-o-y, supported by higher income from investment of deposit funds and investment account, a rise in income from investment of shareholders’ funds and an improvement in net income from the takaful business.

The group’s gross loan growth picked up pace to 6.8% y-o-y in 2QFY18 or a year-to-date annualised growth of 6.1% (1QFY18: 6.7% y-o-y). Contributing to this was an expansion in consumer loans, which grew 10.5% y-o-y or 9.4% annualised while growth for commercial loans improved to 9.2% y-o-y or 3.3% annualised. These were, however, partially offset by a contraction in corporate loans of 17.4% y-o-y or 13.6% annualised due to two large repayments totalling RM1.1 billion. The increase in consumer loans continued to be mainly driven by an expansion in house financing (+11.2% annualised) and personal financing (+11.4% annualised). Growth in vehicle financing shrank as it was not a segment focused by the group.

The group’s net income margin (NIM) rose five basis points (bps) to 2.65% in 1HFY18 versus 2.6% for the full FY18 (1HFY17: 2.57%). The improvement was due to the January 2018 overnight policy rate hike of 25bps and a change of its loan portfolio mix favouring financing with higher yields. Funding cost has been gradually rising as the group steps up efforts to diversify its funding mix with longer-term funding sources, and reduce its customer deposits. This was to meet the net stable funding ratio (NSFR) requirement with a comfortable buffer. The group is now close to the minimum NSFR requirement of 100%.

Year to date, it has seen a decline in customer deposits by RM1.4 billion or 3%. In May, the group raised funds from Cagamas totalling RM1.5 billion. The group aims to improve its asset yield from the rebalancing of its consumer loan portfolio with a stronger growth in high-yielding personal financing to offset the pressure on its funding cost, and keep its NIM stable for FY18. Also, the stiff market competition for deposits, which are expected to raise deposit rates moving closer to the implementation of NSFR, could impact margins. — AmInvestment Bank, Aug 28

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