• Crown jewels in Islamic financial services. BIMB offers investors exposure to Islamic finance, both banking and takaful industry. Given the nature of under penetration for both industries in Malaysia, we are positive that BIMB is in the pole position to benefit from further proliferation of Islamic financial services. We believe that BIMB deserves a premium in the banking industry given it’s the only Syariah-compliant full-fledged banks listed on Bursa Malaysia, riding on the underserved and rising Islamic finance awareness in Malaysia.

• Solid fundamentals. BIMB has an arsenal of tools to lean on to weather the current challenging operating environment, supported by its niche in Islamic banking (Bank Islam was ranked third in 2015 with RM57bn of assets, behind Maybank Islamic and CIMB Islamic), high CASA ratio and liquid balance sheet (to stave off NIM compression) as well as consistently delivers top tier ROE in the industry post Bank Islam stake acquisition.

• Pending an ascending triangle breakout. BIMB’s share price has gradually recovered from a 6-month low of RM3.90 (14 Sep 16) and formed a series of higher highs and higher lows to 52-week high of RM4.51 (27 Feb) before ending lower at RM4.41 yesterday. Despite the mild pullback, BIMB may resume its uptrend after forming a long-legged doji pattern in its latest session with share prices trending above the support trend line. A breakout above RM4.51, in our view, could form a new upswing towards RM4.68 before climbing higher towards our LT objective at RM4.95. On the flip side, key supports are RM4.33 (22 Mar low) and RM4.25 (30-w SMA). Cut loss at RM4.22.

Source: Hong Leong Investment Bank Research - 23 Mar 2017