Investment Highlights

• We maintain our BUY call on BIMB Holdings (BIMB) with an unchanged FV of RM5.40/share. Our FV is based on an FY19 ROE of 12.5% leading to a P/BV of 1.7x. No change to our estimates.

• BIMB Holdings reported a 1QFY18 net profit of RM172mil (+15.0%QoQ; +13.9%YoY). Earnings were within expectations, accounting for 28.0% of our and 26.2% of consensus estimates.

• Total revenue grew 8.8%YoY contributed by higher income from investment of deposit funds and investment account, a rise in income from investment of shareholders’ funds and an improvement in net income from takaful business.

• The group recorded a year-to-date annualized growth in gross financing of 4.4% or 6.7%YoY. Contributing to the expansion was higher consumer loans, which grew by 9.6% annualized partially offset by contractions in commercial and corporate loans of 2.8% and 24.0% annualized respectively. The increase in consumer loans was mainly driven by expansion in the mortgage book (+11.3% annualized) and personal financing which are mainly extended to government and GLC employees. Growth in vehicle financing, credit card and Ar-Rahnu (Islamic pawn broking) was subdued.

• The group’s net income margin (NIM) rose 3bps QoQ to 2.63%, benefitting from the OPR hike of 25bps in Jan 2018. Funding cost has gradually been rising. Nevertheless, an improving asset yield from the rebalancing of its consumer loan portfolio to increase its mix of higher yielding personal financing has managed to keep a lid on the group’s NIM from declining. The group’s percentage of floating rate loans rose marginally to 89%, which is high among peers, to benefit from any subsequent increase in interest rates.

• The group’s gross impaired financing (GIF) ratio recorded an uptick to 0.99% in 1QFY18 from 0.93% in 4QFY17. Despite of the rise, its GIF ratio remained well below that of the banking industry’s 1.6%.

• Total gross impaired financing rose 7.7%QoQ to RM429mil. The increase was seen contributed mainly by impaired loans to the construction sector which rose by RM36mil or 41.5%QoQ. 1QFY18 saw the GIF ratio for commercial and corporate loans rising to 1.91% from 1.70% in the preceding quarter. Meanwhile, GIF ratio for consumer loans recorded a slight uptick to 0.70%.

Source: AmInvest Research - 31 May 2018