FY22 earnings of RM491.6m (-8%) came within expectations but the full year dividend payment of 13.8 sen was a pleasant surprise. Pending updates from today’s briefing, we opine BIMB will continue operating cautiously as it plans around its LEAP25 strategies. That said, sequential financing growth results may translate to favourable market share gains. Maintain MARKET PERFORM but with a lower GGM-derived PBV TP of RM2.35 (from RM2.45) on lower ROE inputs.

FY22 within expectations. FY22 net profit of RM491.7m is well within our full-year forecast and consensus full-year estimate (at 102%). An interim dividend of 10.4 sen was declared in Dec 2022 with a further 3.4 sen being declaring in conjunction with the result’s release. This amounts to a full-year payout of 13.8 sen which is above our initially booked 10.0 sen as we had not anticipated for BIMB to pay more than once. The payout ratio of 60% is also a new high for the stock.

YoY, FY22 total Islamic income rose by 9% thanks to strong financing growth (+11%) mitigating the decline in net interest margin (2.75%, -12 bps) as CASA levels taper down. Meanwhile, investment income declined by 12% as forex and fair value adjustments were unfavourable. Operating expenses rose by 10% as personnel costs grew, bringing cost income ratio to 61.6% (+2.6ppts). In terms of impairments, credit cost eased to 22bps (-11bps) on better staging of previously delinquent accounts. Overall, due to higher taxes led by the one-off prosperity tax, FY22 net earnings came in at RM491.6m (-8%).

Sound delivery of report card. With the end of its FY22, we gathered that BIMB has ticked off most of its guidances, notably excelling in its financing growth of 11% against a targeted 8%. The group has also kept below to its credit cost target of 25-30 bps to come in at 22 bps. Going forward, we reckon BIMB will be prone to similar deposit price competition spurred by a stagnant OPR which urges greater marketing and promotions for lenders to capture a wider share. That said, BIMB could continue to be in an expansionary mode as demanded by its LEAP25 strategies to boost efficiency and outreach, translating to better long-term sustainability.

Forecasts. Post results, our FY23F earnings is left relatively unchanged, pending updates from a briefing later today. We also introduce our FY24F numbers.

Maintain MARKET PERFORM with a lower TP of RM2.35 (from RM2.45). While we roll over our valuation base year to FY24F, we also consider that it could register more stable returns in the medium-term given its higher sensitivity to interest rates and operating cost volatility. With that, we opted to slightly tone down our ROE input for our GGM to 8.0% (from 9.0%), arriving at a lower PBV of 0.68x (from 0.85x). While the stock offers an investment opportunity in a shariah-compliant financier, we believe the risk-reward at current price levels is well matched. There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us.

Risks to our call include: (i) higher/lower-than-expected margin, (ii) higher/lower-than-expected loans growth, (iii) better/worse-than-expected movement in asset quality, (iv) stronger/weaker capital market activities, (v) favourable/unfavourable currency fluctuations and (vi) changes in OPR.

Source: Kenanga Research - 28 Feb 2023