BIMB Holdings Bhd - FY12 broadly in line

Period  4Q12/FY12

Actual vs. Expectations  The FY12 PAT of RM250.8m (+18.3% YoY) was broadly in line with the consensus forecast (94%) and that of ours (92%). However, the 4Q12 PAT of RM67.1m was weaker due to a softer top line revenue number as well as a higher than expected tax rate.

Dividends  No dividend was declared during the quarter. However, full year net DPS of 10.68/sen represents a payout of 45% and within expectation.

Key Result Highlights  YoY, the FY12 fund-based incomes of RM1,059.1m grew 15.0% thanks to a strong financing growth of 37% to reach a total financing portfolio of RM20b thanks to ETPrelated financing. The growth rate was above our forecast of 30%. BIMB’s balance sheet has continued to expand at a fast pace. Its financing-to-deposit ratio rose to 60.2%, up from 58.7% in 3Q12.

 QoQ, the 4Q12 fund-based incomes of RM268.6m shrunk by 8.8% to RM268.6m mainly due to the narrowing financing margin by 40bps to 2.67% despite a strong 7.6% financing growth (QoQ).

 We note that its non-fund based incomes were weaker in 4Q12 as they dipped to RM224.8m (-13.5% QoQ and +17.5% YoY) and made up 46% of the total income in the 4Q. Recall that the group had enjoyed a strong feebased incomes growth in 3Q12 that was boosted from the sale of its shareholding in Syarikat Takaful Malaysia with an estimated one-off gain of RM28.8m.

 We continue to see improving asset qualities with the gross impaired financing amount falling to RM308.7m and the gross impaired ratio improving to 1.55% (from 1.74% in 3Q12). The financing loss coverage meanwhile hit a new high of 142.6% (vs. 3Q12: 130.5%).

 Due to a weaker revenue, the cost-to-income ratio was higher at 55.4% in 4Q12 vs. 53.4% in 3Q12. The FY12 ratio of 57% was above our estimate of 54%.

 In summary, the FY12 ROE of 13.7% was broadly in line with our estimate of 14.2%.

Outlook  We are still expecting Bank Islam to achieve a higher financing growth target of 15% YoY by end-FY13 with a Financing-to-Deposit ratio of 57%. Its likely higher growth rate than the industry’s 10.4% financing growth rate will mainly come from the financing of 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 expect the possibility of potential corporate actions by management ahead to unlock the value of the group.

Change to Forecasts  There are no changes in our earnings estimates.

Rating    Maintain OUTPERFORM

 We believe that any corporate actions could act as a rerating catalyst for the group. On the operating side, we believe that its 14% ROE target is highly achievable, or could be even better, despite the current gloomy environment.

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

Risks  Tighter lending rules and a margin squeeze.

Source: Kenanga