RHBCAP (1066) - RHB Capital Bhd - Back to IGNITE
Target RM10.50 (Stock Rating: ADD)
With merger talks called off, RHB Cap can fully concentrate on its IGNITE 17 transformation programme. In terms of earnings growth, we expect the lender to outperform most of its peers in 2015 due to the benefits from IGNITE and above-industry loan growth.
We cut our projected FY15-16 EPS and DDM-based target price (COE of 11.8%; LT growth of 4%) to factor in the higher cost of funds. RHB is rated an Add and our top pick for the sector given its: (1) attractive valuation, (2) above-industry loan growth, and (3) expanding IB business.
IGNITE(ing) the growth
We are positive on the implementation of IGNITE 17 transformation programme as this would help the group improve in the areas that it has traditionally been weak, like Islamic banking, treasury, SME and exposure to the massaffluent market. The group will benefit from key initiatives like the launch of Group Treasury operations, realignment of the Islamic banking and SME business models as well as the introduction of wealth management services in Singapore.
Outperforming peers for earnings growth
We think that RHB Capital would outperform most of its peers in terms of earnings growth in 2015 because of: (1) its above-industry loan growth, (2) benefits from the implementation of IGNITE 17, and (3) good traction in investment banking income.
Healthy earnings expansion
RHB Capital is projected to turn in a healthy net profit growth of 9.7% (and EPS growth of 9.2%) in FY15. This would be supported by an expected expansion of 6.4% in net interest income and 9.7% in non-interest income. Cost-wise, overheads and loan loss provisioning would rise by 6.4% and 11.1%, respectively.
No M&A plans in near-term
The group has shelved its M&A plans in the near-term, including those in overseas market, given the unconducive environment and its low valuation, in our view. This would slow down the pace of regional expansion in the short-term, but we believe that it is still adamant on becoming a regional banking group in the longer-term.
Source: CIMB Daybreak - 28 January 2015
Target RM10.50 (Stock Rating: ADD)
With merger talks called off, RHB Cap can fully concentrate on its IGNITE 17 transformation programme. In terms of earnings growth, we expect the lender to outperform most of its peers in 2015 due to the benefits from IGNITE and above-industry loan growth.
We cut our projected FY15-16 EPS and DDM-based target price (COE of 11.8%; LT growth of 4%) to factor in the higher cost of funds. RHB is rated an Add and our top pick for the sector given its: (1) attractive valuation, (2) above-industry loan growth, and (3) expanding IB business.
IGNITE(ing) the growth
We are positive on the implementation of IGNITE 17 transformation programme as this would help the group improve in the areas that it has traditionally been weak, like Islamic banking, treasury, SME and exposure to the massaffluent market. The group will benefit from key initiatives like the launch of Group Treasury operations, realignment of the Islamic banking and SME business models as well as the introduction of wealth management services in Singapore.
Outperforming peers for earnings growth
We think that RHB Capital would outperform most of its peers in terms of earnings growth in 2015 because of: (1) its above-industry loan growth, (2) benefits from the implementation of IGNITE 17, and (3) good traction in investment banking income.
Healthy earnings expansion
RHB Capital is projected to turn in a healthy net profit growth of 9.7% (and EPS growth of 9.2%) in FY15. This would be supported by an expected expansion of 6.4% in net interest income and 9.7% in non-interest income. Cost-wise, overheads and loan loss provisioning would rise by 6.4% and 11.1%, respectively.
No M&A plans in near-term
The group has shelved its M&A plans in the near-term, including those in overseas market, given the unconducive environment and its low valuation, in our view. This would slow down the pace of regional expansion in the short-term, but we believe that it is still adamant on becoming a regional banking group in the longer-term.
Source: CIMB Daybreak - 28 January 2015
