Investment Highlights

• We maintain our BUY call on BIMB Holdings (BIMB) with a revised FV of RM4.90/share from RM4.80/share based on a higher SOP valuation. We continue to see upside to the share price of BIMB as Bank Islam is still undervalued with the market valuing it at a P/BV value of 1.1x. We tweak our FY19/20/21 net profit estimates higher by 8.4%/7.4%/7.3%, adjusting our income projection from the investment of depositor and account funds as well as raised our estimates for net income from takaful.

• The group reported a net profit of RM208mil (+6.8% QoQ) in 3Q19. On a QoQ basis, earnings improved largely due to a higher net income from takaful business partially offset by slightly higher provisions for financing losses and increase in operating expenses.

• BIMB’s 9M19 earnings of RM606mil (+16.4% YoY) exceeded expectations, making up 85.5% and 80.6% of our and consensus estimate respectively. The deviation to our projection was due to higher-than-expected earnings from the Takaful business under Syarikat Takaful Malaysia Keluarga (STMK).

• The stronger 9M19 profit was attributed to higher earnings from both Bank Islam and STMK.

• Bank Islam recorded an increase in fund-based income due to expansion of financing and increase investments of financial instrument as well as higher non-fund-based income from gains in sale and revaluation of securities. Meanwhile, STMK reported higher earnings underpinned by higher net wakalah fees from a rise in sales of creditrelated products under family takaful coupled with stronger investment income.

• Gross financing growth accelerated to 8.7% YoY in 3Q19 from 7.2% YoY in 2Q19. Net financing growth was 8.9% YoY and continued to be higher than the industry’s expansion of 3.9% YoY. The stronger loan momentum was due to the pace of corporate financing picking up to 33.8% YoY from a low base while growth in consumer and commercial financing eased to 6.8% YoY and 2.7% YoY respectively (2Q19: 7.2% YoY and 6.8% YoY).

• 3Q19 saw growth in house and personal financing moderating to 9.0% YoY and 6.9% YoY respectively. Meanwhile, vehicle financing continued to contract by 12.9% YoY. The group remains on track to meet its FY19 loan growth target of 6.0–7.0%.

Source: AmInvest Research - 2 Dec 2019