BIMB Holdings (“BIMB”) held an analyst briefing yesterday chaired
by its Group Managing Director / CEO, En Johan Abdullah. We came back with the
view that the group is likely to see a good earnings growth in 2H12 with risk
biased to the upside as the group had reduced its stake in Syarikat Takaful Malaysia
(“STM”) by 3.12% to 62.1% over the last two months. Its upcoming earnings growth will be even
stronger as compared to 1H12. The strategic decision in capitalising on the
upward trend in Takaful Malaysia’s share price performance will benefit BIMB’s
profitability and valuation. The current share price of RM3.09 works out to an
undemanding entry price of just 1.36x BV into its 51%-owned Bank Islam. As such, we believe BIMB is still deeply
undervalued and we do not discount the possibility of some corporate actions by
the management to unlock its value. BIMB continues to be our dark horse pick in
the banking sector.
Unlocking its value
through STM divestment. The group is
starting to divest its stake in STM to capitalise on the strong share price performance
of the latter while still maintaining a majority control (51% equity
stake). As at 7 September 2012, the
group has divested a 3.12% equity interest in STM or 5.08m shares, at proceeds
which could be as much as RM30m. STM has tripled its market capitalisation to
RM1.0b from RM326m in Dec 2011, and is currently trading at a forward consensus
PER of 12.9x FY13 earnings and at 1.6x P/BV.
Patience will
Pay-off. According to its MD, Encik
Johan, the group will continue to explore various strategies to enhance
stakeholders value, including the possibility of its 51% owned Bank Islam
assuming BIMB’s listing status. As such,
we do not discount the possibility of potential corporate actions by management
ahead to unlock the value of the group.
In addition, Bank Islam’s management is expecting to achieve
a higher financing growth target of 25% YoY by end-FY12 with a better Financing-to-Deposit
ratio of 60%. Its higher than the
industry’s 13% financing growth will mainly be contributed by ETP-related
projects. As such, we still expect Bank
Islam to deliver a faster balance sheet growth and achieve a better asset
quality similar to its peers in 2-3 years time.
Bank Islam is also aiming to add 9 new branches, including 4 new consumer
banking centres, by end-2012 for a total of 134 branches.
Going forward,
its unique positioning in the Islamic banking and Takaful areas should also
enable BIMB to deliver a faster balance sheet growth than other commercial
banks as it captures the growth opportunities arising from Malaysia's ongoing
development of Islamic banking. A strong deposit funding and ample room to
leverage up its lending activities in Islamic loans also support a NIM expansion
for the bank, which has a Financing-to-Deposit ratio of only 56%.
We are maintaining
our target price at RM3.60 based on a targeted multiple of 1.7x its FY13 BV
per share of RM2.10. We believe that any potential corporate actions mentioned above
could act as a rerating catalyst for the group. On the operating side, we
believe its 12% ROE target is highly achievable despite the current gloomy environment.
We also like the stock as its may achieve an asset quality similar to its peers
in 2-3 years time on better management of its assets. A progressive reduction
in credit costs may also boost its profitability.
Source: Kenanga
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