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 12.8% leading to a P/BV of 1.7x. We fine-tune our estimates by adjusting our FY18/19/20 net profit by 2.6%/3.2%/-0.1% as we tweaked our CI ratio and loan growth assumptions.

• 2QFY18 net profit came in at RM150mil (-12.9%QoQ; +10.5%YoY). This led to 1HFY18 earnings of RM322mil (+12.3%YoY) which were within expectations making up 52.4% of our and 50.7% of consensus estimates. Total revenue grew 7.0%YoY supported 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 the takaful business.

• The group’s gross loan growth picked up pace to 6.8%YoY in 2QFY18 or a year-to-date annualized growth of 6.1% (1QFY18: 6.7%YoY). Contributing to this was an expansion in consumer loans which grew 10.5%YoY or 9.4% annualized while growth for commercial loans improved to 9.2%YoY or 3.3% annualized. These were however partially offset by a contraction in corporate loans of 17.4%YoY or 13.6% annualized due to 2 large repayments totaling RM1.1bil. The increase in consumer loans continued to be mainly driven by an expansion in house financing (+11.2% annualized) and personal financing (+11.4% annualized). Growth in vehicle financing shrank as it was not a segment focused by the group. Outstanding balances for Ar-Rahnu (Islamic pawn broking) fell while growth in credit card receivables was subdued.

• The group’s net income margin (NIM) rose 5bps to 2.65% in 1HFY18 vs. 2.60% for the full FY18 (1HFY17: 2.57%). The improvement was due to the Jan 2018 OPR hike of 25bps and a change of its loan portfolio mix favouring financing with higher yields. Funding cost has been gradually rising as the group stepped up efforts to diversify its funding mix with longer term funding sources, and reduce its customer deposits. This was to meet the NSFR requirement with a comfortable buffer. The group is now close to the minimum NSFR requirement of 100%.

• Year to date (YTD), it saw a decline in customer deposits by RM1.4bil or 3.0%. On May 2018, the group raised funding from Cagamas of RM1.5bil. The group aims to improve its asset yield from the rebalancing of its consumer loan portfolio with a stronger growth in high yielding personal financing to offset the pressure on its funding cost, and keep its NIM stable at 2.65% for FY18. Also, the stiff market competition for deposits, which are expected to raise deposits rates moving closer to the implementation of NSFR, could impact margins.

Source: AmInvest Research - 28 Aug 2018