A final DPS surprise
Maintain BUY with higher DPS assumption
RHB outperformed in FY21 on the back of a credit cost writeback in 4Q21, and surprised with a final DPS of 25sen. We nevertheless maintain elevated credit costs on the grounds of prudence and project a FY22 ROE of 8.4% versus management’s 8.5% guidance. Maintain BUY with a higher TP of MYR6.30 (+30sen) on rolling forward valuations to FY23 on a PBV of 0.9x (FY23E ROE: 9.6%).
Above expectations
RHB’s 4Q21 core net profit of MYR658m (+44% YoY, -14% QoQ) took FY21 core net profit to MYR2.8b (+21% YoY). The results were 4%/7% above our full-year forecast/consensus. The primary variance stemmed from a credit cost writeback in 4Q21. Management surprised with a final DPS of 25sen, taking full year DPS to 40sen, which is a payout ratio of 63%. Management hopes to maintain pre-COVID payout ratios (was 50% in FY19). We raise our payout ratio assumption to 50% from 40%.
Guidance for FY22
Management’s guidance for FY22 include loan growth of 4-5% (FY21: 6.7%), NIM of 2.11% (FY21: 2.11%), credit cost of 30bps (FY21: 29bps) and ROE of 8.5% including Cukai Makmur (10% excluding). Loan loss coverage on its O&G impaired loans and bonds is 104%.
Keeping credit cost assumptions elevated
Despite the out-performance in FY21, we lower FY22E earnings by 5% but raise FY23E earnings by 5%. We keep credit costs elevated at 40bps in FY22 (versus management’s 30bps guidance) and project an ROE of 8.4% (including Cukai Makmur) against management’s 8.5% guidance.