BIMB (5258) : BIMB Holdings - Signs of weaknesses in underlying trend
Target RM4.50 (Stock Rating: HOLD)
At 71% of our full-year forecast, BIMB’s 9MFY14 net profit was below our expectations but ahead of consensus (86%). The variance came from the lower-than-expected topline. The interim DPS of 14.7 sen was ahead of our projected 11 sen. We lower our FY14-16 EPS forecasts to account for the 4-6% cut in projected non-financing income. As this largely offsets the impact of the roll-over of our valuation to end-2015, our DDM-based target price (COE of 13.5%; LT growth of 4%) is intact. The negative take in the 3QFY14 results was the drop in non-financing and Takaful income. For this reason, BIMB is still rated as a Hold despite its swift loan growth. We prefer Maybank.
Spurred by lower minority interest
The 72.6% yoy earnings growth in 9M14 appears to be impressive, spurred by lower minority interest following its purchase of the remaining stake in Bank Islam at end-2013. But the underlying trend was weak as 9M14 pre-tax profit inched down by 0.5% yoy. This was impacted by (1) flattish non-fund based income, and (2) a 249.1% yoy jump in loan loss provisioning. This offset the strong 9.9% yoy expansion in net financing income.
Still the best loan growth among local banks
BIMB’s loan growth remained strong at 21.1% yoy in Sep 14, albeit slower than the 22.7% yoy in Jun 14. The growth was primarily supported by the 23.5% yoy expansion in household loans. However, manufacturing and general commerce loans only grew by 7-8% yoy.
Stable asset quality
Gross impaired loan ratio rose slightly from 1.15% in Jun 14 to 1.18% in Sep 14 while the loan loss coverage dropped from 179.4% to 167.8%.
Signs of weakening for fund-based income
In the past two years, the strong growth in fee and Takaful income was the key driver for the bank’s earnings. However, the momentum stalled in the past two quarters, pointing to a negative outlook for topline growth.
Source: CIMB Daybreak - 26 November 2014
Target RM4.50 (Stock Rating: HOLD)
At 71% of our full-year forecast, BIMB’s 9MFY14 net profit was below our expectations but ahead of consensus (86%). The variance came from the lower-than-expected topline. The interim DPS of 14.7 sen was ahead of our projected 11 sen. We lower our FY14-16 EPS forecasts to account for the 4-6% cut in projected non-financing income. As this largely offsets the impact of the roll-over of our valuation to end-2015, our DDM-based target price (COE of 13.5%; LT growth of 4%) is intact. The negative take in the 3QFY14 results was the drop in non-financing and Takaful income. For this reason, BIMB is still rated as a Hold despite its swift loan growth. We prefer Maybank.
Spurred by lower minority interest
The 72.6% yoy earnings growth in 9M14 appears to be impressive, spurred by lower minority interest following its purchase of the remaining stake in Bank Islam at end-2013. But the underlying trend was weak as 9M14 pre-tax profit inched down by 0.5% yoy. This was impacted by (1) flattish non-fund based income, and (2) a 249.1% yoy jump in loan loss provisioning. This offset the strong 9.9% yoy expansion in net financing income.
Still the best loan growth among local banks
BIMB’s loan growth remained strong at 21.1% yoy in Sep 14, albeit slower than the 22.7% yoy in Jun 14. The growth was primarily supported by the 23.5% yoy expansion in household loans. However, manufacturing and general commerce loans only grew by 7-8% yoy.
Stable asset quality
Gross impaired loan ratio rose slightly from 1.15% in Jun 14 to 1.18% in Sep 14 while the loan loss coverage dropped from 179.4% to 167.8%.
Signs of weakening for fund-based income
In the past two years, the strong growth in fee and Takaful income was the key driver for the bank’s earnings. However, the momentum stalled in the past two quarters, pointing to a negative outlook for topline growth.
Source: CIMB Daybreak - 26 November 2014
