BIMB a cheaper entry: Our SOP valuation for BIMB is raised to MYR5.40 from MYR5.20, on factoring in higher valuations for 59.6%-owned Syarikat Takaful (STMB MK, Not Rated). BIMB currently trades at a prospective FY20 PER of just 9.3x as opposed to 13.5x for STMB and provides for cheaper entry to STMB, in our view. At BIMB’s and STMB’s current share prices, Bank Islam is valued at a PBV of just 1x, which is unjustified, in our view, given the ROEs of >12% that the bank is generating. We maintain our BUY on BIMB.
Increased contributions from Takaful: 59.6%-owned STMB has been the group’s key earnings driver over the past few years, with a 5-year (FY13-FY18) core net profit CAGR of 16.5%. Its contribution to BIMB group’s pretax profit has since burgeoned from 20% in FY13 to 30% in FY18.
Growth drivers: That STMB’s earnings growth has been strong, particularly in FY18 (+42% YoY), may be attributed to the following factors: 1) rising bancatakaful contributions, particularly with Bank Rakyat as a new banca partner, 2) rising mortgage protection market share, 3) the push for online motor takaful growth, 4) rising wakalah fee ratios and 5) tax incentives whereby wakalah fees from Family Takaful are tax exempt.
TP raised to MYR5.40: Factoring in lower effective tax rates, our FY19-FY21 net profit forecasts for STMB are raised by 5-7% respectively. As a result, we are looking at a core net profit growth of 31% in FY19E, 10%/11% in FY20E/21E. Correspondingly, our net profit forecasts for BIMB Holdings are raised by 2-3%. STMB currently trades at a prospective FY20 PER of 13.5x and a historical Mar 2019 PBV of 5.3x as opposed to the 4.6x that we had imputed into our earlier SOP. We view STMB’s current valuations to be justified and our historical PBV target for STMB is raised to 5.3x. As a result, our SOP valuation for BIMB is raised by 20sen to MYR5.40.
Source: Maybank
https://klse.i3investor.com/blogs/newmoney/216379.jsp
