KUALA LUMPUR: CIMB Research said RHB Bank Bhd remained an “add” and its top pick for the sector despite the weaker-than-expected second quarter 2016 results.
The research house said its call was premised on the potential re-rating catalysts of the benefits from its IGNITE 17 transformation programme and its attractive valuations of FY17 forecast price-earnings multiple (P/E) of 9.4 times and price-to-book value (P/BV) of 0.8 times.
“We see the Swiber impairment as a hiccup while core earnings trend remained positive in second quarter 2016. The downside risks to our target price would be the spike in gross impaired loan (GIL) /credit cost as well as a slowdown in loan growth,” it said.
RHB Bank posted lower earnings of RM350.17mil for the second quarter due to a one-off full impairment on a corporate bond in Singapore.
The bond is tied to oil and gas service provider Swiber Holdings Ltd that had filed for liquidation last week after being saddled with debts of almost S$1bil (RM2.99bil)
However, its revenue rose 1.2% to RM2.686bil while earnings per share were 8.9 sen compared with 8.1 sen a year earlier. It declared a dividend of five sen.
For its first half, it posted a net profit of RM915mil on the back of RM5.4bil in revenue.
CIMB said RHB Bank’s first hald net profit was below its expectation (46% of its full-year forecast) due to RM252mil impairment for its exposure to Swiber bond.
“However, the results were in line with street estimates at 49% of consensus. The group declared an interim net dividend per share of five sen, which is slightly below our expectation.
“Factoring in the Swiber impairment, we lower our projected FY16 earnings per share by 8.4%, leading to a slight decline in our dividend discount model-based target price from RM6 to RM5.97,” CIMB said.
It noted that RHB Bank’s first half net profit fell 14.7% year-on-year, dented by Swiber impairment. Adjusting for this, first half 216 net profit would have grown a healthy 13.6% year-on-year.
Based on its performance in 1H16, CIMB said the banking group did not achieve most of its FY16 KPIs.
Limited time offer:
Just RM5 per month.
