Investment Highlights

• We maintain our HOLD call on BIMB Holdings (BIMB) with an unchanged FV of RM3.60/share based on SOP valuation. We fine-tuned our FY20/FY21 net profit by - 2.6%/-1.3% to reflect lower net income margin (NIM) assumptions.

• On the group’s restructuring exercise, we understand that it has been submitted to the shareholders’ for approval. The targeted completion for the restructuring is now being pushed back to either end of 4Q20 or 1Q21 from 3Q20 indicated earlier. We gather that there are still keen interest from various parties to take up the placement of new shares to redeem the sukuk held by Lembaga Tabung Haji (LTH) to facilitate the restructuring.

• 1Q20 saw a credit cost of 0.24% vs. 0.20% in 1Q19. This was contributed by higher provisions for stage 2 loans. 2Q20 is likely to see an increase in credit cost due to additional provisions in the expected credit loss (ECL) model arising from the imputation of weaker macroeconomic variables (MEVs). Management is now guiding for a higher credit cost of 0.30% or 30bps in FY20.

• Group GIL ratio is likely to register an uptick from 0.83% recorded in 1Q20 after the end of loan moratorium in Sept 2020. Management is targeting for a GIL ratio of below 1.2% for FY20. Despite the rising unemployment rate which rose to 5.3% in May 2020, we take comfort that 75.0% of the group’s loan base of RM50.4bil comprised of consumer financing. Circa 75.0-80.0% of these consumer financing makes up of loans to GLC/Government employees which is seen as lower risk compared to credits extended to the private sector employees. The group’s SME loan base is relatively small at RM1.8bil. Exposure to the vulnerable segments of Covid-19 (Hospitality, Tourism, Oil & Gas and employees of these sectors) account for less than 6.0% of the group’s total loans.

• On the automatic loan moratorium to defer repayments for 6 months (1 April to 30 Sept 2020), only 8.0% of its consumer and SME loan base have opted out. This leaves 92.0% choosing to stay in the moratorium. Excluding SME loans, 95.0% of the group’s consumer loan base has opted in for the moratorium. For corporate borrowers, less than 35.0% of the loans are under the moratorium and restructuring & rescheduling (R&R).

Source: AmInvest Research - 16 Jul 2020