- We maintain HOLD on RHB Capital Bhd (RHB Cap), with an unchanged fair value of RM8.30/share. Our fair value is based on an unchanged ROE of 11.5% for the new RHB Bank which will take over RHB Cap’s status. This leads to an unchanged fair P/BV of 1.25x, and a fair value of RM6.40/RHB Bank share.
- Furthermore, recall that we had earlier estimated that each RHB Cap share is entitled to 1.29 RHB Bank share following the proposed restructuring. Thus, apportioning our fair value accordingly for RHB Bank leads to a fair value of RM8.30/share for every RHB Cap share held currently.
- RHB Cap’s annualised 1QFY15 net earnings was 14.6% below our forecasts, and also 5.1% below consensus forecast for FY15F. The 1Q made up 21.3% of our estimate and 23.7% of consensus forecast for FY15F. The main shortfall are the net interest income and noninterest income lines.
- Loans growth was flat at only 0.7% QoQ in 1QFY15 (4QFY15: 4.8%), which means an annualised growth of only 3.0%. The company has a loans growth target of 10% YoY for FY15F.
- However, 1QFY15 loans was affected by lumpy repayments. The company said that, excluding one large corporate repayment during the quarter, gross loans growth would have been at 2.2% QoQ.
- NIM compression was less than expected, at -4bps QoQ. This is likely due to robust annualised growth in CASA of 14.0% in 1QFY15, thus exceeding the company’s target of 10% YoY growth.
- Non-interest income slid on a QoQ basis although this is not a major surprise given earlier indications that the conversion of pipeline will likely be soft, due to the quiet capital market conditions.
- Asset quality was sustained, as there was only a minor 0.5% uptick in impaired loans, with the uptick attributed to the SME segment. Loan loss cover remained relatively low at 60.7% in 1QFY15, after the previous quarter’s relatively substantial decrease to 61.1% in 4QFY14 (3QFY14: 66.6%).
- The 1Q was generally softer in terms of revenue growth, with uptick in impaired loans and ongoing lower loan loss cover. However, NIM compression was less than expected, while CASA growth did well. Maintain HOLD.
Source: AmeSecurities Research - 1 Jun 2015
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