BIMB’s FY23 net profit (+13% YoY) beat our forecast (mostly thanks to better margins commanded which outpaced a slower-than-expected financing growth) but only met market expectations. We raise our FY24F earnings by 11% on possibly brighter asset yields and funding costs, pending an upcoming results’ briefing where we hope to obtain forward targets. Maintain our MP call with a higher rolled over GGM-derived PBV TP of RM2.25 (from RM2.15).

BIMB’s FY23 net profit of RM553.0m beat our forecast by 10% but only met market expectations. The positive deviation was due to better-than-expected NIMs retention. This also led to higher full-year dividends of 16.8 sen (c.69%) which is above our anticipated 14.5 sen.

YoY, its FY23 net Islamic revenue was flattish but was lifted by stronger treasury and investment performances, leading total income to rise by 7%. Operating expenses rose by 9% mainly from personnel costs which led to a higher cost-income ratio (62.6%, +1.0ppt). Meanwhile, the group also increased its provisions with a credit cost of 26bps (+4 bps) as certain accounts became delinquent from the higher interest rates. All in, FY23 net profit came in at RM553.0m (+13%).

QoQ, its 4QFY23 income trends appear similar with a notable improvement to credit cost at 6bps (-19bps) as more recoveries were seen during the quarter, leading net profit to also increased by 13%.

Outlook. Although the results had surpassed expectations, we note that the group had undelivered its toned down financing growth target of 4%-5%, which could be dampened by softer personal financing acquisitions. This could be owing to a strong favour towards asset quality but we also note that the group’s loan-to-deposit ratio is on the higher side (117%) as compared to its peers (average <100%). The group also appears successful in containing its funding cost pressures from a meaningful CASA take-up in 4QFY23, which we believe could further extend given that termed deposits may be less attractive going forward.

Forecasts. Post results, we raise our FY24F earnings by 11% mostly to account for better NIMs for the group. Meanwhile, we also introduce our FY25F numbers. We may incorporate further adjustments pending the upcoming briefing on 1 Mar 2024.

Valuations. We lift our TP by 5% to RM2.25 (from RM2.15) as we roll over our valuation base year to FY25F. Our call is based on an unchanged GGM-derived FY24F PBV of 0.64x (COE: 10.5%, TG: 3.5%, ROE: 8%) on a FY25F BVPS of RM3.47. There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us (see Page 4).

Investment case. 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 peers’ average (c.9%). Maintain MARKET PERFORM.

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 Feb 2024