We maintain our MARKET PERFORM call and TP of RM2.00 based on GGM-derived PBV (COE: 11.0%, TG: 3.5%, ROE: 8%) post BIMB’s results briefing. The group remains firm in delivering sustainable results in the near-term with a good handle on immediate challenges. That said, we believe its merits could be fairly priced in with investors possibly with the appetite for higher growth names.

Key takeaways from the recent 1HFY23 results briefing are as follows:

- Financing growth cautiously optimistic at 7%-8%. Although BIMB delivered 9% growth in its 1HFY23 report, the group anticipates possible moderation amidst the softening of certain macros. Glancing at its financing books, the group’s retail and institutional portions grew YoY but noted that the latter is experiencing QoQ churning since the last two quarters.

- NIMs to stay supportive at above 2%. The group appears confident that it is able to sustainably keep its margins afloat thanks to its highly optimal funding mix. Thanks to its CASATIA ratio of c.40% (vs 1HFY22 at c.38%), BIMB was able to raise its 2QFY23 NIM spread to 2.11% (from 1QFY23: 2.06%) while certain competitors continue to experience deterioration from the intense deposits competition following the recent OPR hikes.

- Impairment levels highly manageable. With its 1HFY23 credit cost coming in at 38bps, the group believes it is able to contain its full-year readings at 30-40 bps. Although this is still above its FY22 booking of 23bps (thanks to some write-backs), it is still well within the group’s historical range which indicates it is still operating at comfortable rates of exposure. We believe the group is still sufficiently sheltered from sudden headwinds as it still holds outstanding overlays of RM109m.

- Long-term ROE of 9%-10% in check. Tapping onto most of its initiatives so far, the group opines that it is on track to deliver its desired earnings trajectory. Several fronts that we believe could see additional robustness includes higher penetration in financing share with corporate accounts possibly having the most room for improvement. Although mostly supported by investment gains, the group’s non-fund based could benefit from higher fees from the boosting offered by the growing digital platforms.

Forecasts. Post meeting, our FY23F/FY24F earnings are largely unchanged.

Maintain MARKET PERFORM and TP of RM2.00. Our call is based on an unchanged GGM-derived FY24F PBV of 0.60x (COE: 11.0%, TG: 3.5%, ROE: 8%) on a FY24F BVPS of RM3.36. While the stock may see interest from shariah-seeking investors paired by commendable dividend yields of c.7%, we believe it may be fairly valued at current price points given its moderate earnings growth prospects in addition to its lower ROEs as compared to its peer average (c.9%). 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 financing growth, (iii) better/worse-thanexpected movement in asset quality, (iv) stronger/weaker capital market activities, (v) favourable/unfavourable currency fluctuations and (vi) changes in OPR.

Source: Kenanga Research - 1 Sept 2023