BIMB’s retracement in its share price overdone

by **Cals** Sat 06 Feb 2016, 02:18

BIMB’s retracement in its share price overdone

By MIDF Research / The Edge Financial Daily | February 5, 2016 : 9:55 AM MYT

This article first appeared in The Edge Financial Daily, on February 5, 2016.

[You must be registered and logged in to see this image.]BIMB Holdings Bhd
(Feb 4, RM3.31)
Upgrade to trading buy with a target price (TP) of RM4.22:The furore surrounding Lembaga Tabung Haji’s negative fund reserves has, in our opinion, raised unfounded concerns that some of its assets may be liquidated soon in order to be able to pay dividends to its depositors.

We note that the news has arguably led to a 13.6% decline in BIMB Holdings Bhd’s share price within a space of two weeks to its three-year low of RM3.24 on Wednesday.

This was despite a response to earlier engagements with Bank Negara Malaysia on appropriate measures to further strengthen the Pilgrim Fund Board’s risk management practices.

We opine that the retracement in its share price was overdone and not reflective of BIMB’s fundamental value.

Therefore, we expect its share price to rebound as it has already been trading at an undemanding valuation of financial year 2016 (FY16) price-to-book value (PBV) of only 1.4 times. This also implies a lower FY16 price-earnings ratio (PER) of 8.3 times, which appears cheaper compared with both its three-year average and median PER of 13.5 times each.

The group has been efficient in managing its credit risk, in which its gross impaired loan ratio remained at 1.14% in the third quarter of FY15. We also believe that the group’s risk-weighted capital adequacy ratio is still healthy at 13.3%.

Premise on the above, we maintain our existing financial years’ earnings forecasts.

With its share price trailing underlying its fundamental value, we advocate investors to take advantage of this knee-jerk price action. Hence, we upgrade our recommendation to “trading buy” with an unchanged TP of RM4.22 per share, based on its three-year historical median PBV multiple of 1.76 times. — MIDF Research, Feb 4