BIMB (5258) - BIMB Holdings - Banking on lower MI
Target RM4.25 (Stock Rating: HOLD)
BIMB’s FY14 net profit was in line with our expectations at 105% of our forecasts but above street estimate at 108% of consensus. The net DPS of 14.7 sen for FY14 was within expectations. BIMB missed the end-Feb 15 deadline for the release of its 4QFY14 financial results due to the delay in getting Bank Negara’s clearance. FY14 net profit surged 90.6%, catalysed by lower MI. We maintain our DDM-based target price (COE of 13.5%; LT growth of 4%). Despite its swift loan growth and superior ROE, we still rate BIMB a Hold due to concerns over (1) weak fee income expansion, and (2) an upturn in credit costs. We prefer RHB Capital.
Spurred by lower minority interest
The group’s FY14 net profit growth was spurred by lower MI following its purchase of the remaining stake in Bank Islam at end-2013. The underlying trend was weak as FY14 pretax profit inched down by 0.5% yoy, impacted by (1) a 1% drop in non-fund based income, and (2) RM60m provision for its financing business compared to a net write-back of RM15m in FY13. On a positive note, net financing income rose by a healthy 9.2% on the back of swift loan expansion and a marginal increase of 4bp in net interest margin to 2.79%.
Unrivalled loan growth
BIMB’s loan growth strengthened from 21.1% yoy in Sep 14 to 24.2% yoy in Dec 14, more than double the industry’s pace of 9.3%. The improvement came mainly from the business loan segments including manufacturing and general commerce loans. Although consumer loan growth eased from 23.5% yoy in Sep 14, it remained strong at 22.6% yoy in Dec 14.
Stable asset quality
Gross impaired loan ratio inched down from 1.18% in Sep 14 to 1.14% in Dec 14 while loan loss coverage rose from 167.8% to 170.4%, the highest among the local banks.
Slower net earnings growth in FY15
In the absence of the drop in MI, BIMB’s net profit growth would soften to a single-digit rate in FY15. This would be mainly supported by healthy expansion in net financing income while credit costs are projected to continue rising.
Source: CIMB Daybreak - 13 March 2015
Target RM4.25 (Stock Rating: HOLD)
BIMB’s FY14 net profit was in line with our expectations at 105% of our forecasts but above street estimate at 108% of consensus. The net DPS of 14.7 sen for FY14 was within expectations. BIMB missed the end-Feb 15 deadline for the release of its 4QFY14 financial results due to the delay in getting Bank Negara’s clearance. FY14 net profit surged 90.6%, catalysed by lower MI. We maintain our DDM-based target price (COE of 13.5%; LT growth of 4%). Despite its swift loan growth and superior ROE, we still rate BIMB a Hold due to concerns over (1) weak fee income expansion, and (2) an upturn in credit costs. We prefer RHB Capital.
Spurred by lower minority interest
The group’s FY14 net profit growth was spurred by lower MI following its purchase of the remaining stake in Bank Islam at end-2013. The underlying trend was weak as FY14 pretax profit inched down by 0.5% yoy, impacted by (1) a 1% drop in non-fund based income, and (2) RM60m provision for its financing business compared to a net write-back of RM15m in FY13. On a positive note, net financing income rose by a healthy 9.2% on the back of swift loan expansion and a marginal increase of 4bp in net interest margin to 2.79%.
Unrivalled loan growth
BIMB’s loan growth strengthened from 21.1% yoy in Sep 14 to 24.2% yoy in Dec 14, more than double the industry’s pace of 9.3%. The improvement came mainly from the business loan segments including manufacturing and general commerce loans. Although consumer loan growth eased from 23.5% yoy in Sep 14, it remained strong at 22.6% yoy in Dec 14.
Stable asset quality
Gross impaired loan ratio inched down from 1.18% in Sep 14 to 1.14% in Dec 14 while loan loss coverage rose from 167.8% to 170.4%, the highest among the local banks.
Slower net earnings growth in FY15
In the absence of the drop in MI, BIMB’s net profit growth would soften to a single-digit rate in FY15. This would be mainly supported by healthy expansion in net financing income while credit costs are projected to continue rising.
Source: CIMB Daybreak - 13 March 2015
