BIMB Holdings Bhd - 9M12 above expectations

Period    3Q12/9M12

Actual vs.  Expectations  The 9MFY12 PAT of RM212.5m (+62.8% YoY) was significantly above the consensus’ forecast (86%) and that of ours (86%). 

Dividends   No dividend was declared. 

Key Result Highlights    YoY, the fund-based incomes grew 33.6% thanks to a strong financing growth of 35.1% to reach a total financing portfolio of RM18.5b. The balance sheet continued to expand at a fast pace as the financing-todeposit ratio rose to 58.7%, up from 57.2% in 2Q12.    

 QoQ, the 3Q12 fund-based incomes grew substantially by 18.4% to RM294.5m due to the strong 10.0% financing growth (QoQ). The financing margin actually expanded by 14bps to 3.07%.  

 We note that its non-fund based incomes were also strong in 3Q12 as it grew to RM259.9m (+24.9% QoQ and +79.3% YoY), which also made up 47% of the total income in 3Q. Besides the growth in its fee-based incomes above, we also believe the strong earnings were partly boosted from sale of its shareholding in Syarikat Takaful Malaysia with an estimated one-off gain of RM28.8m.

 We see improving asset qualities with the gross impaired financing amount falling to RM322.4m and the gross impaired ratio improved to 1.74% (from 1.97% in 2Q12). The financing loss coverage meanwhile hit a new high of 130.5% (vs. 2Q12: 126.0% and 3Q11: 83.7%). 

 The cost-to-income ratio was also lower at 53.4% vs. 62.1% in 2Q12. 

 In summary, the annualised 9M12 ROE of 15.5% as well as core earnings ROE 13.9%, was above our estimate of 12.8%.

Outlook   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% (vs. current level of 58.7%). Its likely higher growth rate than the industry’s 13% financing growth rate will mainly be contributed by ETP-related projects.

 We still expect Bank Islam to deliver a faster balance sheet growth from corporate lending and achieve a better asset quality similar to its peers in 2-3 years time.  

 In addition, we also do not discount the possibility of potential corporate actions by management ahead to unlock the value of the group. 

Change to Forecasts     We have raise our FY12-13 earnings estimates by 11-16% to RM274.0-302.0m as we had factored in a higher fee-based contribution as well as a higher loan growth assumption to FY12’s 30% and FY13’s15% from a conservative 10% p.a. previously.

Rating  Maintain OUTPERFORM

 We believe that the potential corporate actions highlighted above could act as a rerating catalyst for the group. On the operating side, we believe its 12% ROE target is highly achievable or even better than that despite the current gloomy environment.

Valuation    We are keeping our target price of RM3.60 unchanged based on 1.7x FY13 BV of RM2.14.

Risks   Tighter lending rules and a margin squeeze.

Source: Kenanga