KUALA LUMPUR: OSK Investment Research said BUMIPUTRA-COMMERCE HOLDINGS [] Bhd’s (BCHB) annualised 1QFY09 core net profit of RM2.35 billion was 22.2% and 12.6% above consensus and its full year forecast respectively.

In a research note issued on May15 BCHB’s stronger-than-expected results were driven by a 76.3% on-quarter recovery in core non-interest income and stronger than expected volume-driven net interest income growth on the back of stable net interest margins and robust loans growth.

Annualised core returns on equity (ROEs) came in at an estimated 13.3%.

“In tandem with our upward revision in FY09 and FY10 earnings estimates and improved outlook for the stock, we have rolled forward our base year valuation to FY10 and increased our sustainable ROEs targets to 12.5%,” it said.

OSK Research said it raised the fair value to RM9.10 underpinned by ROE: 12.5%; a long-term growth rate of 5.0% and cost of equity of 9.8%, giving an implied price-to-book value (PBV) multiplier of 1.58 times (versus post financial crisis PBV mean of 1.55 times).

“Maintain Neutral call. We recommend stronger buying entry closer to the RM8 level,” it added.

OSK Research Core net profit increased 9.0% on-year on the back of a 25.1% expansion in net interest income.

This is due to a full quarter consolidation of a larger loan base from the merged CIMB Niaga-Lippo, CIMB Thai, relatively strong domestic loans growth and strong expansion in net interest margins from CIMB Niaga, coupled with stable domestic net interest margins (NIMs).

However, it was partially dragged down by a 43.7% y-o-y increase in loan loss provision. Pre-provision operating profit growth was strong at 21.4% on-year.

On a on-quarter comparison, core net profit was up 31.5% underpinned by a strong recovery in group treasury earnings where net gains from derivative financial instruments and securities held for trading reversed from a loss of RM214.6 million in 4QFY08 to a gain of RM401.7 million in 1QFY09.

Excluding the maiden contribution of Bank Thai, the group’s loans grew at an annualised 18.8% on-year versus management’s guidance for 8.0% and its 5.0% growth.

On the domestic front, corporate and investment loans was the main growth driver, up a staggering 37.6% y-o-y on an annualised basis.

Loans for the CONSTRUCTION [] sector registered robust growth rates of 37.9% y-o-y while loans to Government and statutory bodies jumped 96.7% on-quarter (386.8% on-year on an annualised basis).

OSK Research said it raised its loans growth assumption to 13.5% for FY09 and 7.5% for FY10 from 5.0% and 6.5%.