Journey to Wealth
RHB Capital - 4Q12 results within expectations
Period 4Q12/FY12
Actual vs. Expectations The FY12 PAT of RM1,784.7m was within the consensus forecast (100%) and that of ours (99%).
Dividends The group has proposed single tier final dividend of 16.09 sen/share.
Key Result Highlights Loan book stood at RM111.5b and it grew strongly by 4.5% QoQ (or 14.6% YoY vs. above our estimate of 12.0%) due to the strong growth in Corporate & Investment lending and Share Margin Financing. Net interest margin (NIM) was compressed marginally at 2.35% (vs. FY11: 2.41%) with the net interest incomes of RM774.2m staying relatively healthy on both the QoQ and YoY basis (at +3.9% and +9.2% respectively). The slight NIM compression was due to the higher than expected deposit growth of 19.0% and the fall in the L/D ratio to 81% (from 85% in 3Q12).
The 4Q12 non-interest incomes meanwhile came in at RM452.2m, up by 65.1% QoQ on OSK IB inclusion. The overall total revenue of RM1,366.0m meanwhile came up by 19.2% QoQ and 20.2% on a YoY basis partly due to the top line synergies of the merger between RHB and OSK IB.
The total cost of RM717.1m was 36.2% higher on a QoQ basis due to the higher staff and marketing costs, which drove the cost-to-income ratio to 52.5%, above our 44% forecast.
The FY12 asset quality improved with a one-off bad debt recoveries. The gross impaired loans ratio fell to 2.99%, which resulted in a better credit charge ratio of 13bps, outperforming our expectation of 40bps. The loan coverage was down marginally to 66.0%.
All in, the FY12 ROE of 13.4% (post the new shares issued to OSK) was within our expectation.
Outlook The group set its FY13 ROE target at 13% (vs. FY12's 13.4%). We think this is achievable after including a minor dilution in the first year of acquisition due to the enlarged share base and a one-off integration cost.
Change to Forecasts We are maintaining our PAT estimate of RM1,951.0m for FY13.
Rating MAINTAIN OUTPERFORM.
RHBCAP stands out from its peers as it trades at just 1.2x BV compared to its long-term average of 1.8x. In our view, the current price of RHBCAP has ignored its ROE of 13% (post-new shares issue for its OSKIB merger), and its growth potential as a real challenger to the current market leaders.
Valuation We are maintaining our TP at RM8.30 based on a targeted 1.3x its FY2013 BV after factoring in the dilution from the larger share base.
Risks Tighter lending rules and a margin squeeze.
Source: Kenanga
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