Actual vs. Expectations The 1Q13 PAT of RM478m was within the
consensus’ expectations (25%) and that of our estimate (25%). The robust PAT
jump (+21%, QoQ +17%) was due to the higher revenue, better cost management and
a strong impaired asset recovery booked in the quarter.
Dividends No
dividend was proposed during the quarter.
Key Result Highlights
The results showed a 4% QoQ revenue
growth.
A strong growth in
its non-interest income drove this outperformance.
The result saw an inspiring 14.5% QoQ increase in non-interest incomes to
RM378.6m due mainly to higher gains from
treasury operation.
However, the net
interest income was recorded at RM623.9m, which was down marginally by 1.8%
QoQ. The decline here was due to falling in NIM by 21bps in 1Q13 to 2.13% (vs.
1Q12’s 2.12%, FY12’s 2.12%). A particularly
difficult margin environment has offset the benefit of its 1.3% QoQ (or +7.5%
YoY) loan growth.
Fortunately, cost was
substantially lower at RM442.9m, down by 7.0% QoQ due to a lower personnel
cost. The group has continued to put in initiatives to extract efficiencies and
synergies. This resulted in the cost-toincome ratio declining to 44.2% from
4Q12’s 49.3%.
Meanwhile, the
adoption of MFRS139 and coupled with proactive credit recovery efforts, the net
impaired ratio and coverage ratio improved further to 1.61% (from 1.69% in
4Q12). While the loan loss coverage ratio declined to 134% from 158% in 4Q12,
we still expect the sub-normal credit cost to continue until year-end.
Chengdu Bank’s profit
contribution meanwhile was flat at RM59m (vs. 4Q12: RM59m).
The overall ROE
remained steady at 15.7%.
Outlook We are
also seeing the positive impact from its merger synergies. Apart from the
low-teen topline growth, say ~12%, the
bottomline growth will be further boosted to mid-teen, say ~16% YoY, due to
lower credit cost.
Change to Forecasts No
changes in our earnings estimates.
Rating Maintain MARKET PERFORM
After the strong
rally of late, we believe that the market has priced in its better prospect.
At the current share
price level, the stock only offers a 4.6% upside to our target price. Coupled
with the projected dividend yield of 2.4%, the stock offers less than a 10% total return and hence, we
are maintaining our MARKET PERFORM rating.
Valuation Our
TP is maintained at RM15.20, representing a 2.0x valuation of its FY14 BV of
RM7.65.
Risks An
unexpected higher dividend payout could drive up its valuation.
Source: Kenanga
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