CIMB  Niaga  (Niaga)  reported  a  muted  set  of  results,  largely  reflecting the challenging macro conditions in Indonesia. While we will likely need to trim our earnings forecasts post CIMB’s analysts meeting later today, we  highlight  that  we  remain  positive  on  its  domestic  front,  backed  by the  ETP.  Malaysia  accounted  for  59%  of  Group  PBT  in  2012.  Maintain BUY and MYR10.90 FV (15x CY14 EPS) for now.

- Result highlights. Niaga reported 2QFY13 net profit of IDR1.1trn (+3% y-o-y; +2% q-o-q), which brought 1HFY13 net profit to IDR2.1trn (+8% y-o-y).  The  results  were  largely  a  reflection  of  the  challenging  macro environment in Indonesia. Annualised loans growth was 7.6% (+9.8% y-o-y), led by the retail (11.5%) and commercial (15.2%) segments, but the corporate  segment  remained  soft  (-6.2%)  (figures  annualised)  due  to Niaga’s more  cautious  stance.  As  a  result,  Management  expects  2013 loans  growth  of  around  10%  (mid  to  high  teens  growth  previously). Meanwhile,  total  deposits  were  down  by  an  annualised  1.4%  (+9%  y-o-y),  with  demand  deposits  falling  24.6%  q-o-q  (+1.7%  y-o-y)  and  lower time  deposits  (-7.6%  q-o-q;  +7.1%  y-o-y).  Thus,  the  loan-deposit  ratio (LDR)  surged  q-o-q  to  98.2%  from  85.6%  at  end-March  2013.  Despite the rise in LDR, 2QFY13 net interest margin (NIM) rose by a mere 6bps q-o-q (-94bps y-o-y). NIM may remain under pressure in 2HFY13 due to: i) impact from the 50bps policy rate hike in July 2013, as deposits tend to be  repriced  quicker  than  loans  initially,  although  this  is just  a  temporary timing difference and NIM would expand once loans start to be repriced, and ii) a build-up of liquidity as Niaga intends to lower its LDR to the 95% optimal range. Provision expense, however, was a bright spot (-19% y-o-y; -32% q-o-q) due to lumpy recoveries during the quarter.  

- Asset  quality  and  capital.  Gross  impaired  loans  ratio  improved  30bps q-o-q  to  2.54%.  Loan  loss  coverage  (LLC)  was  98.3%  (1Q13:  91.4%). Management  identified  the  consumer  segment  as  a  potential  area  to watch out ahead due to the impact from the recent hikes in interest rates and fuel prices. Finally, capital adequacy ratio (CAR) at end-2Q13 stood at 15.9% (end-1Q13: 16.1%).

- Forecasts  and  investment  case.  We  keep  our  earnings  forecasts unchanged for now, pending CIMB’s analysts meeting later today. We will  likely  need  to  trim  our  numbers  post  the  briefing.  Niaga  contributed 32%  to  Group  PBT  in  FY12.  Our  fair  value  of  MYR10.90  (15x  CY14 EPS) and BUY call are unchanged for now.

Source: RHB