RHBCAP (1066) - RHB Capital Bhd - A keen lender
Target RM10.50 (Stock Rating: ADD)
RHBCap’s FY14 net profit was almost spot on with our forecast (99.6%) and in line with consensus (101%), but its full-year net DPS of 6 sen was way below our projected 23 sen. Even so, the company has maintained its policy of a 30% dividend payout that forms the basis for our DPS projection for FY15-17. Our DDM-based target price (COE of 11.8%; LT growth of 4%) is intact. RHBCap remains an Add and is our top pick for the sector, given its (1) robust loan growth, (2) continuous expansion of its investment banking (IB) business, (3) attractive valuation (CY15 P/E of 9.1x and P/BV of 1x), and (4) benefits from its IGNITE 17 transformation programme.
Hiccups in 4Q due to…
The group’s 4QFY14 net profit fell by 3.6% yoy to RM486.2m, impacted by two developments that are not reflective of its underlying trends. Firstly, net interest income fell by 6.9% yoy in 4QFY14, partly dragged down by higher interest expense from the issuance of US$300m senior unsecured notes on 3 Oct 14, which are not fully deployed. Secondly, 4QFY14’s staff costs shot up by 28.1% yoy, lifted by the provision for exceptionally high performance-based remuneration (bonuses), which would not be repeated in the coming quarters.
Superb loan growth
Loan growth picked up further from 12% yoy in Sep 14 to a sterling 17% yoy in Dec 14, way above the industry’s 8.7%. This was mainly driven by the stronger momentum for property loans (to 23-43% yoy in Dec 14) and working capital loans (to 21% yoy) while the pace for auto loans eased to only 3% yoy.
No strains on asset quality
The group’s gross impaired loan ratio improved further from 2.3% in Sep 14 to 2% in Dec 14, but its loan loss coverage fell from 66.6% to 61.1% over the same period.
Banking on swift loan growth
We expect the group’s overheads to normalise to a lower level in the coming quarters, while the strong loan growth would rejuvenate its net interest income growth in 2015. This would help it to achieve a healthy projected EPS growth of 9.6% in FY15.
Source: CIMB Daybreak - 02 March 2015
Target RM10.50 (Stock Rating: ADD)
RHBCap’s FY14 net profit was almost spot on with our forecast (99.6%) and in line with consensus (101%), but its full-year net DPS of 6 sen was way below our projected 23 sen. Even so, the company has maintained its policy of a 30% dividend payout that forms the basis for our DPS projection for FY15-17. Our DDM-based target price (COE of 11.8%; LT growth of 4%) is intact. RHBCap remains an Add and is our top pick for the sector, given its (1) robust loan growth, (2) continuous expansion of its investment banking (IB) business, (3) attractive valuation (CY15 P/E of 9.1x and P/BV of 1x), and (4) benefits from its IGNITE 17 transformation programme.
Hiccups in 4Q due to…
The group’s 4QFY14 net profit fell by 3.6% yoy to RM486.2m, impacted by two developments that are not reflective of its underlying trends. Firstly, net interest income fell by 6.9% yoy in 4QFY14, partly dragged down by higher interest expense from the issuance of US$300m senior unsecured notes on 3 Oct 14, which are not fully deployed. Secondly, 4QFY14’s staff costs shot up by 28.1% yoy, lifted by the provision for exceptionally high performance-based remuneration (bonuses), which would not be repeated in the coming quarters.
Superb loan growth
Loan growth picked up further from 12% yoy in Sep 14 to a sterling 17% yoy in Dec 14, way above the industry’s 8.7%. This was mainly driven by the stronger momentum for property loans (to 23-43% yoy in Dec 14) and working capital loans (to 21% yoy) while the pace for auto loans eased to only 3% yoy.
No strains on asset quality
The group’s gross impaired loan ratio improved further from 2.3% in Sep 14 to 2% in Dec 14, but its loan loss coverage fell from 66.6% to 61.1% over the same period.
Banking on swift loan growth
We expect the group’s overheads to normalise to a lower level in the coming quarters, while the strong loan growth would rejuvenate its net interest income growth in 2015. This would help it to achieve a healthy projected EPS growth of 9.6% in FY15.
Source: CIMB Daybreak - 02 March 2015
