NEUTRAL, new MYR2.80 TP from MYR3.30, 4% downside with 3% FY22F dividend yield. Post analyst briefing, we maintain our conservative stance on BIMB. Despite it being a major beneficiary of the Overnight Policy Rate (OPR) hike (25bps increase would lift NIM by 8bps), near-term headwinds are expected to delay its recovery prospects. We note that there were some downwards revisions in its guidance.
Another round of surprise. In its recent 1Q22 results, we were taken by surprise by its trading losses of MYR21.7m, which dragged 1Q22 non- financing income. Management indicated that the decline was within expectations, given less opportunities that they could take on investment papers compared to 1Q21 where, at that point in time, the OPR was expected to decline. Fees and commissions remained flattish QoQ, but gains from FX and its unit trust business were impacted by the unfavourable USD movement and the volatility from the geopolitical crisis respectively.
Loans under repayment assistance (LURA) is now at 5% of its total loan book (from 6% in end-February). We understand that there was some strain in asset quality for financing customers that was previously tagged under the repayment assistance programme – mostly from customers not within the salary deduction scheme. With that, management has decided to take in additional ECL to be prudent, given the still challenging backdrop. 1Q22 GIF of 1.02% stands below the industry average of 1.54%. While there are expectations for a further deterioration, given these challenging times, management hopes to contain GIF at <1.5% in FY22 (target: 1.2%).
Guidance. Management continues to see FY22 as a recovery year, setting the stage for a 10% ROE target for FY22 with Cukai Makmur (FY21 8.4%). However, this time around, management highlighted that the recovery would perhaps happen in the 2H22. NIM is expected to come in at 2.3-2.4% (vs 2.4% previously), with the assumption of an additional 25bps hike in the OPR for FY22, through a proactive management of liabilities to lower cost of funds and CASA Transactional Investment Account (CASATIA) growth (40% target). Measures are in place to monitor the recovery of financing disbursements, given the challenging backdrop and additional noise introduced to its data post-graduation of those under LURA (no updates given on its 8% YoY growth target). Its credit cost has been revised to <35bps from 25-30bps.
Earnings and TP. Post-analyst briefing, we refresh our assumptions for key earnings drivers, which results in 9-10% lower FY22-24F net profit. Our key assumptions are conservative (mainly lower NIMs and loan growth) vs management’s guidance. Our new GGM-derived TP of MYR2.80 also reflects 0.8x P/BV against a sustainable ROE of 8%. A 0% ESG premium is applied, based on BIMB’s ESG score of 3.0
