1HFY22 earnings above expectations
Maintain BUY
We raise HLFG’s FY22-24E earnings by 5-7% on the back of higher earnings from HL Bank. On the back of a higher TP for HL Bank, our SOP-derived TP for HLFG is raised too to MYR22.10 from MYR20.55 previously. We maintain a BUY on HLFG.
Above expectations
HLFG’s 1HFY22 earnings were above expectations predominantly because of higher-than-expected earnings from HL Bank. Our FY22/23E earnings are raised 5%/7% to accommodate an upward revision to HL Bank’s net profit forecasts. HLFG declared an interim DPS of 15sen (nil in 1HFY21).
HL Bank’s earnings above expectations
HL Bank’s 2QFY22 core net profit of MYR739m (+10% YoY, -17% QoQ) was above expectations, taking 1HFY22 core net profit to MYR1,629m (+16.4% YoY) or 53%/54% of our full-year forecast/consensus respectively. The variance arose predominantly from further NIM expansion QoQ and much stronger earnings from Bank of Chengdu (BOCD), which saw its pretax profit contribution jump 40% YoY. BOCD now contributes to 22% of group pretax, up from 20% in 1HFY21. We understand that the bank has no
exposure to troubled property developers in China.
Insurance division fared well
HL Capital’s 1HFY22 pretax profit declined 45% YoY in 1HFY22 due to lower trading activity on the stock market and reduced investment banking earnings. HL Assurance Holdings saw its pretax profit rise 13% YoY in 1HFY22 due to a higher life fund surplus, lower operating expenses and higher contribution from the general insurance division.