RHB Cap (Hold) - Better FY12 Earnings Outlook

RHB Cap (Hold)

Better FY12 Earnings Outlook

• FY11 results in line with HLIB and consensus.
• Final div of 11.82 sen and single-tier 5.59 sen, FY11 30% payout in line with unchanged policy and HLIB’s projection
• Missed FY11 ROE KPI due to one-offs but management already gave early warning while asset quality as well as loans and deposits growth were ahead of KPIs.
• FY12 KPI of >14% ROE (post acquisition of Mestika and RI).  HLIB ROE projection is at the lower end. 
• Management assured that it has already made sufficient impairment for the CLO exposure.
• We expect FY12 earnings enhancement from: 1) absence of the one-offs; 2) guidance of improving NIM; and 3) benefits of 400 new touch points to gradually filter through. 
• Mestika and OSK M&As slated for completion by 1HFY12. 
• Raised FY12-13 forecasts by 10-11% (absence of one-offs).
• Maintain Hold.
• Target price raised to RM7.85 based on Gordon Growth with ROE of 14.5% and WACC of 11.4%, from RM7.37. 

Source: HLIB Research 29 Feb 2012