KUALA LUMPUR (May 29): MIDF Research has maintained its "buy" call on BIMB Holdings Bhd and raised its target price to RM4.25 from RM4.05 previously.

In a note today, MIDF Research analyst Imran Yassin Yusof said BIMB continues to show strong earnings momentum despite the challenging environment.

“In light of the group’s better-than-expected results, we are revising our FY20, FY21 and FY22 earnings forecast upwards to RM695.3 million, RM717.4 million and RM754.3 million respectively,” he said.

According to him, the group’s earnings for the first quarter ended March 31, 2020 (1QFY20) came in above its expectations as he had overestimated the income attributable to depositors.

The better performance was also largely due to 8.4% lower taxation and a marginal contribution from Bank Islam.

According to the group's bourse filing yesterday, net profit for BIMB rose 3.3% to RM209.24 million from RM202.52 million a year ago, on the back of better performances from its two main subsidiaries, Bank Islam Malaysia Bhd and Syarikat Takaful Malaysia Keluarga Bhd.

This resulted in higher earnings per share of 11.71 sen for 1QFY20 compared with 11.63 sen for 1QFY19.

Meanwhile, its profit before zakat and tax (PBZT) rose slightly by 0.8% year-on-year (y-o-y) to RM221.5 million, whereas its net income grew 30.2% to RM593.3 million.

Imran attributed this to better-than-expected gross financing growth, with consumer financing expanding by 5.9% y-o-y to RM37.7 billion, underpinned by house and personal financing (up 7.6% y-o-y to RM20.6 billion and 6.4% to RM14.9 billion respectively), as well as cheaper cost of funding as total deposits and investment accounts grew 3.1% to RM55.5 billion.

Meanwhile, gross impaired financing (GIF) ratio has improved by 12 basis points to 0.83% in 1QFY20 from a year ago, likely due to the high growth in gross financing and the steady profile of its borrowers who comprise groups such as government employees.

However, its total provision rose 35.6% from a year ago, leading to higher credit cost by 4 basis points to 0.24%.

While he expected BIMB’s subsidiary Bank Islam to experience higher credit cost and pressure on asset quality, it believed that these factors will be manageable due to the profile of the bank’s borrowers.

“As such, we maintain our ‘buy’ call. We revise our TP [target price]… as we roll over our valuation to FY21,” he said, adding that the target price was based on a price-book value of 1.1 times.

At 12.24pm, shares in BIMB were up 1 sen or 0.28% at RM3.62, giving it a market capitalisation of RM6.47 billion. It saw some 471,800 shares traded.