Investment Highlights

• We maintain our BUY call on BIMB Holdings (BIMB) with an unchanged FV of RM5.40/share. Our FV is based on a FY19 ROE of 13.2% leading to a P/BV of 1.7x. We tweaked our net profit estimates for FY18/19/20 by 8.0%/3.3%/5.0% by lowering our CI ratio and increasing our estimates for income from investment of shareholders’ funds.

• 3QFY18 net profit came in strongly at RM199mil (+32.5%QoQ; +8.4%YoY). This led to 9MFY18 earnings of RM521mil (+12.3%YoY) which were above expectations making up 82.7% of our and 81.3% of consensus estimates.

• Total revenue jumped 11.1%YoY supported by higher income from investment of deposit funds and investment account, rise in income from investment of shareholders’ funds and stronger net income from takaful business.

• The group’s gross financing growth gained traction to 10.5%YoY in 3QFY18 (2QFY18: 6.8%YoY). YTD annualised net financing growth of 6.8% was in line with our estimate. Contributing to the expansion in gross financing was consumer financing which grew 10.1%YoY while growth in commercial and corporate financing was also strong at 9.8%YoY and 17.6%YoY respectively. The increase in consumer financing continued to be driven largely by expansion in house financing (+11.9%YoY) and personal financing (+12.1%YoY). Meanwhile, both vehicle financing and Ar-Rahnu (Islamic pawn broking) contracted while growth in credit card receivables picked up pace to 4.0%YoY.

• Net income margin (NIM) remained stable at 2.65% for 9MFY18, similar to 1HFY18. Against FY18 NIM of 2.60%, it was higher by 5bps. The improvement in asset yield was contributed by the OPR hike of 25bps in Jan 2018 and the change of its loan portfolio mix favouring financing with higher yields. The composition of its higher yielding personal financing to total financing has risen to 39.4% vs. 38.8% as at the end of FY17.

• Funding cost has been gradually rising. We believe that this has been contributed by the repricing of deposit rates after the OPR hike. Besides, the group’s stepped-up efforts to diversify its funding mix with longer term funding sources, and reduce its dependence on customer deposits has also contributed to the increase. This has been evidenced by the YTD contraction in customer deposits by RM0.6bil while funding from Cagamas of RM1.5bil was raised in 2QFY18. We believe that the group has already met the minimum NSFR requirement of 100.0%.

Source: AmInvest Research - 29 Nov 2018