Part of its FIT@22 programme is focussing on the SME segment with winning the SME space via concentrating on small business and enhancing the SME customer experience. While strategies are in place to achieve this, the fruits of its labor are expected to be seen by end of FIT@22 which is by FY2022. In the meantime, no revisions to our earnings forecasts and we maintain our TP of RM5.75 and a MARKET PERFORM call.

Top 4 in the SME space. Hosting a briefing for analysts last week, RHBBANK outlined its roadmap to win in the SME space under its FIT@22 programme. Recap earlier this year, the bank outlined that under its FIT@22 strategic programme (as IGNITE 18 ends) loan portfolio will be rebalanced with Retail & SME/Corporate at 75%/25% from the current 69%/31% as it views corporates as volatile. Currently, the Group is at the 4th position in the SME space. From the briefing, we understand that the portfolio rebalancing will be precisely as follows; Corp/Business/Retail at 20%/25%/55% with the SME segment predominantly under the business segment with SME contributing 80% of business banking.

Growing via small business and enhancing customer experience. Part of its FIT@22 is focusing on 4 Target Segments; Affluent, SME, Mid-Caps and Large Caps. SME will be focussing on small business segment to drive growth and leveraging on it to drive the Affluent segment. While gearing into its vision - ‘To be the preferred SME & Transaction Bank domestically’, its end target is to be the top 3 SME bank in Malaysia (as at 1H18: RHBBANK is the Top 4 with an industry market share of 8.5%). Achieving this growth will be via focusing on the small business segment and at the same time building connected ecosystem with the focus on profitability and digitization (as a key enabler and providing superior customer experience).

Accelerating growth via new transaction centers and digitization. To accelerate growth, Point of Sales (POS) and Business Centers (CBBC) will be expanded to 34 and 350, respectively, by FY19 (from the current 31 and 301). Online SME financing (via iSmart or Smart Application Support) will expedite financing within 5 days (with the guarantees given by CGC). Given the guarantee by CGC, unsecured financing will also be approved within 5 days but with yields in lower teens (vs the average SME’s yield of ~5%).

No change in earnings. Our FY18E/19E earnings are maintained at RM2.01b/2.16b with unchanged assumptions; (i) loans growth lower (from +5.5% to +3.5%), (ii) NIM with 2bps enhancement (previously flattish), and (iii) CIR (from <50% to <49%).

TP and call maintained. TP maintained at RM5.75 using PB/PE of 0.89x/10.7x with the PB multiples based on their 5-year mean with a 0.5SD below to reflect on challenges and uncertainties ahead. We feel this is justifiable given that the stock had been trading between 0.8x- 0.9x in the last 12 months. Maintained call at MARKET PERFORM.

Source: Kenanga Research - 01 Oct 2018