BIMB HOLDINGS BHD

By RHB Research Buy (maintained) Target price: RM4.80

RHB Research remains positive on Islamic financial services group BIMB Holdings Bhd for its resilient earnings growth and higher-than-industry asset quality.

In its published note, the research house said that BIMB’s earnings in the financial year of 2017 (FY17) made up 100% and 99% of its and consensus’ full-year forecasts respectively.

The group posted a net profit of RM620mil in FY17, which has risen by nearly 11% yearon-year (y-o-y).

“The group’s stellar performance was largely due to both higher operating income and write-back of provisions.

“BIMB’s operating income was higher by 4% y-o-y in 2017, driven by both strong loan growth and higher contribution from non-interest income.

“BIMB’s 2017 loan growth of 7% y-o-y far surpassed that achieved by the industry while asset quality remained resilient with gross impaired loan ratio ticking down further to 0.93%,” it said.

RHB Research projects the group to be at the tail end of its loan recovery moving forward. As for BIMB’s credit cost, it is expected to range between 21-23 basis points during FY18-20.

“The group’s loan impairment in the first half of FY17 (1H17) was offset by write-backs of RM49.2mil in 2H17, bringing cumulative FY17 loan write-back to RM15mil. This compares with FY16’s loan provisions of RM92mil,” it said.

On BIMB’s deposit, the research house said that growth was marginal at 0.8% y-o-y in FY17, driven largely by growth in the group’s demand deposits.

“The group’s continuous effort to focus on its investment account has led to the group’s higher cost of funds but this was partially mitigated by a stronger current and savings account ratio of 31%,” it said in the note.

BIMB’s loan-to-deposit ratio was lower at 84.5% in the fourth quarter of FY17, as compared to 88% in the previous quarter.

RHB Research has maintained its “buy” call on BIMB, but lowered its target price to RM4.80 from RM4.90 previously. Earnings forecasts were also left untouched. forex and higher raw material prices.

However, Kenanga Research remains “positive” on the group’s performance, moving forward.

“We believe prospects remain overall favourable with expansions in PPB’s grains business (new plant in Pasir Gudang), films (expansions in Malaysia and Vietnam) and property (launch of Megah Rise project in Petaling Jaya in Nov 2017).

“Wilmar’s prospects are also decent in the first quarter of FY18 with the possibility of lower sugar segment’s earnings volatility on their shift in marketing strategy.

“Tropical oils business should see better performance in the second half should the Indonesian government expand biodiesel quotas, while oil and gas outlook remains favourable on positive crush margins in China,” said the research house in a note.

Kenanga Research has maintained its “outperform” call on the stock and raised the target price to RM19.85, from RM19.25 previously.