BIMB Getting Ready For The Race?

Technical Outlook

BIMB has just broken above its 2013 high of RM4.29 and traded at a high of RM4.43 around 10:45am. If this upside breakout can sustain, BIMB could continue its prior uptrend. Based on a 1-to-1 extension, the potential target for a successful rally is RM5.00.


Chart 1: BIMB's weekly chart as at Feb 10, 2017_10.56 (Source: MalaysiaStock.Biz)

Its warrant, BIMB-WA has however showed no sign of any impending upside move. Trading at a premium of 17%, BIMB-WA has an exercise price of RM4.72 & expiry date of Dec 4, 2023. If BIMB can continue its prior uptrend, BIMB-WA would be a very good bet.


Chart 2: BIMB-WA's daily chart as at Feb 10, 2017_10.48 (Source: MalaysiaStock.Biz)

Recent News Flow

Today, the Sundaily published an extract bullish report on BIMB from HLIB Research (here). HLIB initiated a BUY call for BIMB with a target price of RM5.00. HLIB highlighted the strength of BIMB as follows:

• It consistently delivers top-tier ROE in the industry with an average of 11%, post-Bank Islam stake acquisition. In comparison, only two other banks – Public Bank Bhd and Alliance Financial Group – managed to maintain a double-digit ROE.
• It has high current accounts and saving accounts (CASA) ratios of 37% to 47%, higher than the industry average of 25%, which benefit mainly government bodies and agencies and religious associations.
• It has good asset quality, with gross impaired financing improved from a high of 22% in FY05 to FY06 to 1.1% in FY15.
• It is the only syariah-compliant full-fledged bank listed on Bursa Malaysia, riding on the under-served and rising Islamic finance awareness in Malaysia.

Recent Financial Results

In the last quarter (QE30/9/2016), BIMB's net profit dropped 2% q-o-q but rose 17% y-o-y to RM141 million while revenue rose 5% q-o-q or 10% y-o-y to RM881 million.


Table: BIMB's last 8 quarters' P&L


Graph: BIMB's last 18 quarters' P&L

Valuation

BIMB (closed at RM4.28 on Feb 8) is now trading at a PER of 11.6x (based on last 4 quarters' EPS of 37 sen). I believe this is a fair PER.

Conclusion

Based on tentative technical breakout, satisfactory financial performance and fair valuation, I reiterate my BUY call for BIMB. The alternative is to get into its warrant, BIMB-WA, which may present a better reward-to-risk proposition. Good luck!

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.