BIMB’s prospects remain intact amid some cautionary notes on financing growth. BUY with a SoP-driven TP of RM5.10, based on: (i) our ascribed Bank Islam’s valuation of 0.9x FY22E PBV, and (ii) 0.25x per TAKAFUL share. While investors might be looking ahead into the group’s restructured form with a positioning into TAKAFUL, presently BIMB itself commands commendable ROEs of c.11%. Additionally, as the only listed Shariah-compliant bank, the stock could command a scarcity premium in certain investors’ eyes.

Under PEMULIH, the group is said to have reached a target repayment assistance (TRA) proportion of 42% of its total financing, from less than 10% in 2QFY21. However, this is still below management’s anticipated 50% mix, partly due to the moratorium being opt-in in nature. Arising from this, management is also confident that modification losses for 3QFY21 will range between RM50m-RM60m.

As of now, management believes they are able to sustain their NIMs target of 2.20%-2.40%. (1HFY21: 2.44%). Due to the challenging economic climate, the group’s optimism towards being able to achieve its previous financing growth target of 8-9% is now closer to 7%.

With regards to credit cost, management had earmarked a guidance of 30-35 bps for the year (annualised YTD: 16 bps). However, management expressed it might not be burdened by the need for heavier provisioning as it anticipates more write backs given the health of its assets.

Meanwhile, there are some minor administrative hiccups with the restructuring exercise, delaying its completion to earlyOct2021 from end-Sept 2021. Recall that the group has already obtained all necessary approvals from shareholders and regulators for the exercise pending legal procedures.

Source: Rakuten Research - 2 Sept 2021