1QFY21 PATAMI of RM202.5m (-3%) is within expectations. The group has carved a 5-year plan (by 2025) to boost its asset size and improve efficiency, with digitalisation expected to be at the forefront. Meanwhile, investors are expected to be eyeing the progress of the upcoming restructuring plan closely, given it could still serve as a cheaper proxy to TAKAFUL shares. Maintain OUTPERFORM and SoP- driven TP of RM5.15, pending updates from an analysts’ briefing today.
1QFY21 within expectations. BIMB’s 1QFY21 PATAMI of RM202.5m is within expectations, making up 26%/25% of ours/consensus expectations. No dividends were declared, as expected. The group typically announces dividends once per year.
YoY, 1QFY21 total income fell slightly by 2% to RM831.0m, as net Islamic income (-5%) was dragged by softer NIMs of 2.57% (-41 bps) in spite of a 6% larger financing base. The pressure on NIMs could be owing to repricing of financing outpacing that of deposits, which also grew meaningfully at 7% amidst OPR cuts. That said, this was held by slightly better investment income and Takaful business (+1%). CIR rose to 60.9% (+2.4ppt) as operating expenses increased (+2%) on higher personnel costs and general expenses. On the flipside, there were fewer loan impairments booked following the heavy provisioning already accounted for in FY20. 1QFY21 operating profit closed at RM313.4m (-3%) which translated to a PATAMI of RM202.5m (-3%). On another note, the quarter’s gross impaired financing was slightly better at 0.71% (-12 bps) with financing loss coverage being buoyant at 234.5% (from 178.9%) thanks to accumulation over FY20.
QoQ, 1QFY21 total income regained 2% led by stronger Takaful business (+13%). However, operating expenses kicked up by 6% on higher personnel costs with some impairments being provided for in the quarter (RM11.8m vs. reversal of RM3.5m in 4QFY20). The further provisions could be accounting for further uncertainties with tighter movement controls. 1QFY21 PATAMI hence closed 9% weaker.
Keeping a close eye on restructuring plans. We await the upcoming analysts’ briefing today to obtain updates from management with regards to the restructuring plan of the group, which was earmarked to be completed by Aug 2021. Investors will be curious to observe the group sans Takaful’s operations, with management pinning digitalisation and social financing to be some of its drivers going forward. Recall that BIMB had announced a 5-year plan with several targets, including: (i) growing its asset size to >RM100b (FY20: ex-Takaful RM74b), (ii) reducing CIR to <50% (FY20: ex-Takaful 53%), and (iii) ROE of >15% (FY20: 11.6%).
Post results, we leave our assumptions unchanged for now, pending potential adjustments after the analysts’ briefing.
Maintain OUTPERFORM and SoP-driven TP of RM5.15, based on: (i) our ascribed BIMB 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.
Risks to our call include: (i) higher-than-expected margin squeeze, (ii) lower- than-expected loans growth, (iii) worse-than-expected deterioration in asset quality, (iv) further slowdown in capital market activities, (v) adverse currency fluctuations, (vi) delay in restructuring exercise, and (vii) changes in OPR.
Source: Kenanga Research - 28 May 2021