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Author: kltrader   |   Latest post: Tue, 15 Oct 2019, 8:52 AM


BIMB Holdings - Acquisition Completed; Upgrade to BUY

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Deal completed. We are positive on the price that BIMB has paid for the remaining 49% stake in Bank Islam, which translates to a decent Sep 2013 P/BV of 1.8x for a bank that offers ROEs of 15-16%. Moreover, the deal is EPS accretive by about 10-11%. Fundamentals remain very much intact and we project a strong 2-year EPS CAGR of 29%, due in part to earnings accretion from the recent corporate move. Our SOP-derived TP is unchanged at MYR4.80 and with the recent weakness in share price, we take this opportunity to raise our call to a BUY, with a 14% upside to the stock.

BIMB has completed the purchase of the 49% stake in Bank Islam that it does not own for MYR2.86b (30.5% from Dubai Financial Group and 18.5% from Lembaga Tabung Haji). This is 3% lower than the top end pricing for the deal given that the transacted USD:MYR rate was MYR3.232 versus the upper limit of MYR3.35. The rights-cum-warrants raised MYR1.8b to fund 63% of the deal, while the balance of MYR1.0b has been covered by a sukuk issuance at a profit rate of 6.25%.

Pricing is decent. The deal prices Bank Islam at a Sep 2013 P/BV of 1.8x, which is decent relative to ROAEs of 15-16% for the bank.

Net profit upped 53-56% for FY14-15, with expectations that Bank Islam will account for 88% of group pretax profit in FY14. EPS accretion is projected to be a lower 10-11% due to the dilutive impact of the rights issue which contributed to a 40% enlargement in share capital.

ROEs jump to 18.6% for FY14 and FY15 from 14.5% previously, due to the write-off of the acquisition goodwill to reserves of MYR1.3b.

Overall, we are positive on BIMB prospects. We forecast aboveindustry financing growth of 16% in FY14 (vs industry of 9-10%), emanating primarily from growth in personal and mortgage financing. Asset quality remains impeccable with a gross NPF ratio of just 0.4% for personal financing and a group NPF ratio of 1.39% end-Sep 2013 is still below the industry average of 2%. What is encouraging as well is the group’s financing/deposit ratio of just 64%, which provides room for NIM management and ample liquidity to support topline growth.

Source: Maybank Research - 23 Dec 2013

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Labels: BIMB

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