Investment Highlights

• We maintain our BUY call on BIMB Holdings (BIMB) with a revised FV of RM5.20/share from RM4.90/share after raising our SOP valuation by ascribing a higher PB multiple of 3.8x (5-year historical average PB) from 3.0x for its insurance subsidiary, Syarikat Takaful Malaysia Keluarga (STMK). Our earnings estimates are unchanged.

• The group reported strong results in 1QFY19 with a net profit of RM203mil (+25.5% QoQ; +17.6% YoY). On a YoY basis, earnings improved due to higher net income partially offset by a rise in operating expenses. Total net income grew by 18.1% YoY in 1QFY19 underpinned by high fund-based income from Bank Islam’s strong financing growth coupled with better income contribution from its insurance subsidiary, STMK. The stronger performance from the family takaful business arising from increased sales of credit-related products, coupled with lower claims, boosted the earnings of STMK.

• BIMB’s 1QFY19 earnings were within expectations, making up 28.0% and 27.1% of our and consensus estimate respectively.

• Gross financing growth remained strong 8.5% YoY in 1QFY19 vs. 8.9% YoY in the preceding quarter. Net financing growth of 8.7% YoY continued to be higher than the industry’s +4.9% YoY. Contributing to the expansion was consumer financing which rose 8.5% YoY while growth in commercial and corporate financing expanded by 8.7% YoY and 10.1% YoY respectively. Key drivers for consumer loans continued to be house and personal financing which grew 10.6% YoY and 9.5% YoY respectively. Meanwhile, growth in vehicle financing contracted while outstanding for credit cards grew by a modest 3.1% YoY.

• Net income margin (NIM) slipped 2bps to 2.59% in 1QFY19 from 2.61% as at the end of FY18. This was attributed to higher funding cost as the mix of longer term deposits with higher rates increased. The group’s asset yield rose in 1QFY9 after the upward revision in its base rate and base financing rate by 13bps in Nov 2018 to mitigate some pressure on its cost of funds. Moving into 2QFY19, we expect NIM to ease further due to the 25bps cut in the OPR in May 2019, reducing its average asset rate. This impact on margin will be temporary as the group’s deposits are largely expected to be repriced lower after 1 to 2 quarters. For FY19, we have imputed a 6bps margin compression from FY18’s NIM.

Source: AmInvest Research - 24 May 2019