We maintain our MARKET PERFORM call and TP of RM2.15 based on GGM-derived PBV (COE: 10.5%, TG: 3.5%, ROE: 8.0%) post BIMB’s 2023 Investor Day. The group expressed the need to build sustainable foundations for its operations with further initiatives to be driven by purpose and benefit to customers. Headline guidances for FY23 were unchanged with overall conditions still supporting an expansionary climate for group earnings.

Key takeaways from the recent briefing are as follows:

- Working for better inclusion. We note that BIMB’s recent Sadaqa House initiative seeks to provide greater financial inclusion with funds gathered through charitable means and zakat. As this allocation would be separate from depositors and shareholders’ funds, the group could see significantly less credit risk from its operations while affording zero if not near zero interest.

- Bending old conventions. In efforts to widen the group’s product offerings, BIMB is dwelling into broadening investment accounts for restricted accounts, which at present are largely for unrestricted customers. We gather this to be longer-term in nature akin to fixed deposits and are likely to appeal to larger institutional customers, which may help the group in managing funding cost. Meanwhile, the group is contemplating non-packaged personal financing to cater to the wider non-government servant market. The group is in the midst of developing a viable credit model.

- 7%-8% financing growth a cautiously optimistic target. The group has maintained its financing growth target of 7%-8% in spite of a 9% YoY growth in 1HFY23. We reckon this stance is owing to its flattish QoQ expansion which may dictate strong acquisitions to take place in 2HFY23. That said, we remain unconcerned as BIMB typically reports its largest financing books expansion in its 4Q period.

- NIMs may enjoy further expansion. The group saw its 2QFY23 NIM improved to 2.11% (1QFY23: 2.06%) thanks to supportive CASATIA levels of c.39%, away from the heavy deposits competition seen at end-2022. The group may continue to see higher readings albeit with an indicative 2.2% NIM in 4QFY23.

- Building a solid ROE foundation. A ROE target of 9%-10% has been set for the upcoming three years, with the help of more SME accounts with enhancements to branch capabilities allowing the group to offer a wider suite of services. We believe a key enabler would be tight asset quality management where the group has sustained to keep its gross impaired financing at below industry level. This may ultimately narrow its provisioning needs going forward and diminish credit cost requirements.

Forecasts. Post meeting, we maintain our FY23F/FY24F earnings.

Maintain MARKET PERFORM and TP of RM2.15. Our call is based on an unchanged GGM-derived FY24F PBV of 0.64x (COE: 10.5%, TG: 3.5%, ROE: 8.0%) on FY24F BVPS of RM3.36. While the stock may see interest from Shariah-compliant 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-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 - 12 Oct 2023