Investment Highlights

• We maintain our BUY call on BIMB Holdings (BIMB) with a revised FV at RM5.50/share from RM5.40/share. Our FV is based on an FY19 ROE of 13.9% leading to a P/BV of 1.7x. We tweaked our net profit estimates for FY19/20 by 3.9%/6.4% after raising our net income margin assumptions.

• 4QFY18 saw a softer net profit of RM161mil (-18.7%QoQ) due to higher operating expenses and finance cost. This led to 12MFY18 earnings of RM682mil (+10.0%YoY) which were in line with expectations, making up 100.3% of our and 100.4% of consensus estimates.

• Total income rose 8.5%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 grew 8.9%YoY in 4QFY18 vs. 10.5%YoY in the preceding quarter. Net financing growth of 8.5%YoY was higher than our projection of 7.0%. Contributing to the expansion in gross financing was consumer financing, which grew 9.6%YoY while commercial financing expanded 9.8%YoY. Corporate financing slowed down from the previous quarter to register a growth of 4.3%YoY. Consumer loans continued to be driven largely by an expansion in house financing (+11.4%YoY) and personal financing (+11.2%YoY). Meanwhile, vehicle financing contracted 11.4%YoY.

• Net income margin (NIM) was stable at 2.61% for FY18 (FY17: 2.60%). Improvement in asset yield contributed by the 25bps OPR hike in Jan 2018 and change in loan portfolio mix favouring financing with higher yields were offset by higher funding cost. We expect Bank Islam’s recent increase in base rate and base financing rate by 13bps each in Nov 2018 to improve its asset yield ahead, thus alleviating the pressure of rising funding cost.

• Cost of funds has been gradually rising. We believe that this was contributed by the repricing of deposit rates after the OPR hike. In addition, stronger growth in term deposits coupled with funding from Cagamas of RM1.5bil raised in 2QFY18 also played a part in increasing its cost of funds. Growth in CASA and transactional investment account was muted at 1.1%YoY. Slower CASA growth could put pressure on its NIM.

Source: AmInvest Research - 1 Mar 2019