Maybank IB Research ups BIMB to RM5.40, boost from Sykt Takaful

The reorganisation would see Bank Islam taking over the listing status of BIMB, a structure similar to that of Affin Bank Bhd and RHB Bank Bhd.

KUALA LUMPUR: Maybank Investment Bank Research has raised its sum-of-parts valuation for BIMB Holdings to RM5.40 from RM5.20 after factoring in higher valuations for 59.6%-owned Syarikat Takaful Malaysia Bhd (STMB).

The research house said on Tuesday BIMB trades at a prospective FY20 PER of just 9.3 times as opposed to 13.5 times for STMB and provides for cheaper entry to STMB. 

“At BIMB’s and STMB’s current share prices, Bank Islam is valued at a price-to-book value (PBV) of just one times, which is unjustified, in our view, given the returns on equity (ROEs) of more than 12% that the bank is generating. We maintain our Buy on BIMB,” it said.

Maybank Research pointed out 59.6%-owned STMB has been the group’s key earnings driver over the past few years, with a five-year (FY13-FY18) core net profit CAGR of 16.5%.

Its contribution to BIMB group’s pretax profit has since burgeoned from 20% in FY13 to 30% in FY18.

“That STMB’s earnings growth has been strong, particularly in FY18 (+42% YoY), may be attributed to the following factors: 1) rising bancatakaful contributions, particularly with Bank Rakyat as a new banca partner, 2) rising mortgage protection market share, 3) the push for online motor takaful growth, 4) rising wakalah fee ratios and 5) tax incentives whereby wakalah fees from Family Takaful are tax exempt,” it pointed out.

The research house said that factoring in lower effective tax rates, its FY19-FY21 net profit forecasts for STMB are raised by 5-7% respectively. 

Hence, it is looking at a core net profit growth of 31% in FY19E, 10%/11% in FY20E/21E. Correspondingly, its net profit forecasts for BIMB Holdings are raised by 2%-3%. 

STMB currently trades at a prospective FY20 PER of 13.5 times and a historical March 2019 PBV of 5.3 times as opposed to the 4.6 times that Maybank Research had imputed into its earlier sum-of-parts. 

“We view STMB’s current valuations to be justified and our historical PBV target for STMB is raised to 5.3 times. As a result, our sum-of-parts valuation for BIMB is raised by 20 sen to RM5.40,” it said.