BIMB’s 9MFY23 net profit (+8% YoY) was within expectations. Pending further updates from today’s briefing, we believe the group may still be on track to meet its FY23 targets. We noticed NIMs had demonstrated an encouraging showing which may beat last year’s performance, attributed by a stronger retail portfolio. Maintain our MP call and GGM-derived PBV TP of RM2.15.

9MFY23 within expectations. BIMB’s 9MFY23 net profit of RM394.8m made up 76% of our full-year forecast and 77% of consensus full-year estimate. No dividend was declared as BIMB typically announces a single payment in the year, safe for FY22.

YoY, 9MFY23 total Islamic revenue only inched up by 2% despite a 8% expansion in its financing base, as new product margins may be thinner. That said, the group appear to book an increase in NIMs of 6 bps to 2.79%. Meanwhile, investment income grew 45% from treasury and dividend gains. While total incomes increased by 9%, operating costs were higher by 11% as personnel costs were inflated from recent collective agreements. This led cost-income ratio to rise to 61.5% (+0.8ppt). With regards to provisions, credit cost rose to 33 bps (+11 bps) as certain accounts were adversely impacted by a higher interest rate environment. Overall, this translated to 9MFY23 net profit to report at RM394.8m (+8%).

QoQ. 3QFY23 income also saw growth as seen from both financing books (+1%) and interest margins (+11 bps) delivery. Notably, its credit cost also showed easing to 25 bps (-12 bps) likely due to riskier accounts being already impaired in the previous quarter. All in, 3QFY23 net profit was 3% stronger at RM140.5m.

Outlook. BIMB appears to be on track to deliver its full-year targets riding on sustained demand for Islamic financing. The group continues to make headway in home financing which could be aiding its bid to grow retail deposits, supplementing a reducing portfolio of business deposits. This could be key in driving group NIMs to supportive levels which may close above FY22’s readings despite intense competition seen during the year. To encourage further participation, the group had expressed interest in providing non-packaged personal financing products, which could aid in maintaining its 7%-8% financing growth target.

Forecast. Post results, we leave our FY23F/FY24F earnings unchanged pending updates from a briefing later today.

Maintain MARKET PERFORM and TP of RM2.15. Our call is based on an unchanged GGM-derived FY24F PBV of 0.64x (COE: 10.5%, TG: 3.5%, ROE: 8%) on a FY24F BVPS of RM3.36. While the stock may see interest from shariah-seeking investors paired by commendable dividend yields of c.7%, we believe it may be fairly valued at current price points given its moderate earnings growth prospects in addition to its lower ROEs as compared to its peer average (c.9%). There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us.

Risks to our call include: (i) higher/lower-than-expected interest margin, (ii) higher/lower-than-expected financing growth, (iii) worse-than-expected deterioration in asset quality, (iv) slowdown in capital market activities, (v) currency fluctuations, and (vi) changes to OPR.

Source: Kenanga Research - 29 Nov 2023