Investment Highlights

• We maintain our BUY call on BIMB Holdings (BIMB) with a lower FV of RM4.60/share (previously: RM4.70/share) based on SOP valuation. We have reduced our FY20 earnings by 4.0% as we factor in another potential interest rate cut of 25bps in 1H20 in addition to the 25bps OPR reduction on 22 Jan 2020.

• The group reported a net profit of RM181mil (-13.2% QoQ) in 4Q19. On a QoQ basis, earnings were softer as modest growth in net income was offset by higher overhead expenses. For 12M19, earnings grew by 15.4% YoY to RM787mil. Cumulative earnings were within expectations making up 101.7% and 101.2% of our and consensus estimate respectively.

• Total net income grew 12.5% YoY for 12M19 underpinned by high fund-based income from Bank Islam’s financing growth of 8.1% YoY, coupled with better income contribution from its insurance subsidiary, Syarikat Takaful Malaysia Keluarga (STMK). This was contributed by the stronger performance from the family takaful business with an increase in sales of credit-related insurance products.

• Gross financing grew by 8.1% YoY while the group’s net financing growth was 8.3% YoY higher than the industry’s expansion of 3.9% YoY. Financing growth was higher than its FY19 growth target of 6.0–7.0%. This was supported by house and personal financing which grew 8.6% YoY and 6.2% YoY respectively. Meanwhile growth in outstanding credit card receivables remained modest at 3.2%YoY.

• Growth of CASA and transactional investment account picked up pace with a growth of 4.7% YoY. This raised the CASA ratio to 32.7% in 4Q19 from 31.2% in 3Q19.

• CI ratio remained stable at 57.5% in 12M19 vs. 57.4%. JAW turned negative to 1.1% for 12M19 due to higher overhead expenses arising from an increase in promotional spending (advertisement, publicity, credit and debit card as well as commission expenses).

Source: AmInvest Research - 28 Feb 2020