INVESTMENT HIGHLIGHTS

• In line with expectations

• PPOP increase drove earnings growth

• NIM improved; against industry trend

• Strong growth in better RAR loans

• Credit cost grew as FY18 saw one-off writeback

• Final dividend 8.2sen, full year dividend 16.7sen

• Maintain earnings forecast

• Maintain BUY with unchanged TP of RM4.75 based on pegging FY20 BVPS to PBV of 1.3x

Meet expectations. The Group posted FY19 net profit growth of +9.0%yoy. This was in line with our and consensus’ expectations as it was 95% and 95.1% of respective full year estimates. The earnings growth was driven by PPOP rising +8.9%yoy.

Strong NII growth and lower OPEX led PPOP increase. The PPOP expansion was contributed by strong NII growth (inclusive of Islamic net financing income) of +8.9%yoy to RM108.5m and decline in OPEX of -2.4%yoy on the absence of transformation cost. The strong growth registered for NII was due to above industry expansion of its gross loans and NIM expansion of +10bp yoy to 2.50%. The NIM improvement was particularly commendable as it was against industry trend and was largely due to its portfolio mix.

Better than industry gross loans growth. Gross loans as at 4QFY19 grew +6.0%yoy to RM42.7b. As with the previous quarters, better RAR loans continue to be the main driver. This grew +27.3%yoy to RM18.3b supported by its Alliance One Account (AOA) and SME & Commercial, which grew by +RM2.2b to RM3.2b and +RM1.3b to RM11.5b respectively. Meanwhile, lower RAR loans continue to be slowly rebalanced as it fell -5.6%yoy to RM24.4b.

CASA growth flat but better than peers. Deposits expanded +5.3%yoy to RM45.9b. This was led by fixed deposits as it grew +6.2%yoy to RM25.6b. Hence, the +20bp yoy increase in COF. CASA growth was flat at RM16.0b. However, we observed that this was better than industry trend as most saw declining CASA in the quarter. The management indicated that it is gaining better traction for its Alliance@Work product which may see better CASA growth.

Asset quality continue to improve. GIL ratio as at 4QFY19 had improved -30bps yoy to 1.1%. We noted that asset quality have either improved or stabilised in all loans segment except AOA. However, this was due to the portfolio seasoning.

Source: MIDF Research - 30 May 2019