BIMB offers investors exposure to Islamic finance
KUCHING: BIMB Holdings Bhd (BIMB), an investment holding company that ‘owns crown jewels in Islamic financial services’, offers investors exposure to Islamic finance, analysts believe.
Companies under BIMB include Bank Islam, Syarikat Takaful Malaysia Bhd (Takaful Malaysia), BIMB Securities and BIMB ArRahnu.
“In terms of total assets (Islamic banking), Bank Islam is ranked third in 2015 with RM57 billion of assets, behind Maybank Islamic and CIMB Islamic,” said the research arm of Hong Leong Investment Bank Bhd ( HLIB Research) in an initiation report.
BIMB consistently delivers top tier return on equity (ROE) in the industry post-Bank Islam’s stake acquisition. The research arm further noted that only two other banks, Public Bank Bhd and Alliance Financial Group Bhd, managed to maintain double-digit ROE.
On the group’s high current account, savings account (CASA) ratio cushioning margin compression, HLIB Research pointed out that Bank Islam’s CASA ratios benefits mainly from deposits from Government bodies/ agencies and religious associations.
“The edge of lower cost of funds accords Bank Islam a control over product pricing to remain competitive in the consumer financing segment,” it said.
As for the group’s strong asset quality, HLIB Research highlighted that Bank Islam’s gross impaired financing (GIF) improved from a high of 22 per cent in FY05-FY06 to 1.1 per cent in FY15 aided by an efficient cleanup of its balance sheet and substantial writebacks post turnaround plan.
Additionally, BIMB’s Syarikat Takaful is the first and only pure takaful operator listed in the Bursa Malaysia.
“Syarikat Takaful sustained its position as the market leader in the Family Takaful business, capturing 25 per cent of the market share,” the research arm said.
Overall, HLIB Research opined that BIMB offers investors exposure to Islamic finance, both banking and takaful industry.
Given the nature of underpenetration for both industries in Malaysia, the research arm remained positive that BIMB is in the prime position to benefit from further proliferation of Islamic financial services here.
On forecasts, HLIB Research projected FY16 to FY18 earnings growth of 13.7 per cent, 4.2 per cent and 2.6 per cent respectively, driven by continuous income growth from Banks Islam and Syarikat Takaful.
“All-in-all, this implies robust three-year earnings compound annual growth rate (CAGR) of seven per cent,” it said.
As such, HLIB Research initiated coverage on BIMB with a ‘buy’ rating and target price of RM5 per share, citing a 16 per cent upside potential.
“We believe that BIMB deserves a premium in the banking industry given that it’s the only syariahcompliant full-fledged banks listed on Bursa Malaysia, riding on the underserved and rising Islamic finance awareness in Malaysia,” the research arm said.