1Q16 core earnings of RM135m were within expectations, accounting for 23%/24% of ours/consensus estimates. No dividends announced as expected. We expect BIMB to be in a defensive stance in FY16 safeguarding asset quality due to the challenging economy. No change in our forecast earnings and MARKET PERFORM call is maintained. However, we lower our TP to RM4.18 (from RM4.30 previously) on a lower P/BV target.
1Q16 net profit was within expectations, but bottomline fell marginally by 0.3% attributed to higher impairments and opex.
3M16 vs. 3M15, YoY
Islamic banking business
Takaful business
1Q16 vs. 4Q15, QoQ
Outlook. We expect BIMB to be in a defensive stance in FY16 safeguarding asset quality due to the challenging economy. We maintain a financing growth estimate of 12% YoY for FY16 despite the better than 1Q16 growth of 17% as management strives to maintain a FDR target of 80% (1Q16: 90%). Thus, we expect NFM to compress to 2.2% for FY16. (1Q16: 2.3%). We thus maintained our assumptions for FY16E/FY17E with (i) financing growth at 12% for both FY16E/17E; (ii) deposits & IA growth at 5.5%/5.0% for FY16E/17E; (iii) credit charge ratio of 0.25% for both FY16E/17E; and (iv) NFMs compression by 10bps to 2.2% for FY16E/FY17E as we expect stiff price-based competition to linger.
No change in Earnings Forecasts. Earnings forecasts are left unchanged as the results were within expectations.
TP lowered as we roll over to FY17E and MARKET PERFORM maintained. Our GGM-TP is now at RM4.18 (vs. RM4.30 previously).
This is based on 1.8x FY17E P/B (previously 1.9x FY16E P/B) where we utilised: (i) COE of 9.6% (previously 10.1%), (ii) FY17E ROE of 14.9 % (previously FY16E ROE of 16.6%), and (iii) terminal growth rate of 2.5% (unchanged). Its valuation is already expensive with a 1.8x P/BV against peers’ P/BV of 1.5X; thus, we maintain Market Perform.
Risks to our call are: (i) Steeper margin squeeze from tighter lending rules and stronger-than-expected competition; (ii) Higher -thanexpected financing and deposits growth and; (iii) Higher-than-expected rise in credit charge as result of a potential up-cycle in nonperforming loan (NPL).
Source: Kenanga Research - 12 May 2016
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