Bumiputra-
Commerce Hldgs
BUY Upgrade
Price RM10.80
Target RM12.30
Solid Growth
Annualised 1HFY09 core net profit of RM2.58bn was 10.2% and 11.6% above
consensus and our full year forecast respectively. The stronger-than-expected
results were largely driven by an exceptionally strong earnings momentum from
CIMB Niaga (+65% q-o-q). Annualised core ROEs came in at an estimated 14.5%,
ahead of our full year estimates of 13.2%. In tandem with our upward revision in
FY09 and FY10 earnings estimates, we have raised our FY09 and FY10 ROE to
14.9% and 15.8% respectively. We thereby raise our fair value from RM9.15 to
RM12.30 underpinned by 1) FY10 ROE: 15.8%, 2) a long-term growth rate of 4.5%
and 3) cost of equity of 9.8%, giving an implied PBV multiplier of 2.30x. Upgrade to
BUY from NEUTRAL. Strong deal pipeline, potential capital management initiatives
and room for further earnings upgrades on the back of lower than expected loan
loss provisions could form the basis for further re-rating on the stock.
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