BIMB Holdings Bhd
(Dec3, RM4.20)
Maintain “hold” with a target price (TP) of RM 4.40. BIMB Holdings has fixed the price of its first dividend reinvestment plan (DRP) at RM3.71 per share, a 10% discount to its five-day ex-dividend volume weighted average market price of RM4.26. It is an attractive discount compared with the average of 5% for Malayan Banking Bhd (Maybank).

To recall, BIMB declared an interim dividend per share (DPS) of 14.7 sen which will go ex on Dec 12, with an entitlement date of Dec 16 for both the interim DPS and the DRP. The new shares are expected to be listed by Jan 14, 2015.

Assuming a reinvestment rate of 80% to 85%, in line with that of its peers such as Maybank, we estimate an average 3.2% to 3.4% dilution to financial year 2015 (FY15) earnings per share from this interim DPS, and up to a 3.7% dilution based on our full-year DPS forecast.

A point to note is that BIMB’s interim DPS of 14.7 sen was computed based on the nine-month earnings of the group and works out to be a payout ratio of about 50%. As such, we expect the final DPS to be much smaller in quantum. Nevertheless, the DPS has still surprised on the upside and we raise our FY14 and FY15 DPS to 16 sen and 17 sen from 12 sen and 13 sen respectively. Dividend yields are decent at 3.8% for FY14 and 4% for FY15. We maintain our “hold” call with an unchanged sum-of-parts TP of RM4.40. — Maybank Investment Bank Research, Dec 3

This article first appeared in The Edge Financial Daily, on December 4, 2014.