Equity Note on IDLC Finance Limited (IDLC) Date: May 04, 2017 Resistance: 75.90 MFI: 38.59 Current Price (BDT): 72.70 Support: 71.14 RSI: 52.60
Company Fundamentals started car loan and personal loan services to individuals in Market Cap (BDT mn) 27,374 2004 and 2007 respectively. No. of Share Outstanding (mn) 377 The company’s business can be segmented into three parts- SME division, Consumer division and corporate Paid-up Capital (BDT mn) 3,771 division. Besides through IDLC Investments Limited, IDLC Free-float Shares (Inst.+For.+Public) (mn) 152 Asset Management Limited and IDLC Securities Limited 3 Months Average Volume 2,268,136 (subsidiaries of IDLC Finance Ltd) provide capital market 3 Months Return 12.56% services to their clients. 52-week price range (BDT) 50.00-79.80 The SME division of the company is the largest division (39%) in terms of portfolio and the consumer division is Sector Forward P/E 22.25 the largest division in terms of fund under management
(41.84%). In terms of CAGR of disbursements; the SME 2014 2015 2016 2017A division stands first again with five years CAGR of Financial Information (BDT mn): disbursement of 30.55% followed by consumer division’s Interest Income 7,432 8,251 8,360 8,348 five years CAGR of disbursement of 23.10% and corporate division’s five years CAGR of disbursement of 16.19%. Net Interest Inc. 4,543 4,833 4,622 4,548 Subsidiary: IDLC Securities Ltd (IDLCSL), IDLC Investments 48 372 476 1,332 Investment Inc. Ltd (IDLCIL), IDLC Asset Management Ltd (Received 3,658 4,588 5,167 6,556 Operating Inc. License on June 07, 2016). Loan Provision 8 312 156 408 o IDLCSL provides brokerage services to retail, Profit After Tax 1,246 1,459 1,780 2,406 institutional and foreign investors. Its market Equity 6,528 7,786 8,937 10,921 share increased from 3.5% in 2016 from 3.1% in Deposit 36,595 47,62 79,359 87,993 2015. NPAT increased by 7.6% in 2016. Loans and Adv. 47,069 55,215 62,265 67,651 o IDLCIL provides issue management, corporate Total Asset 58,927 73,432 79,359 87,993 advisory, mergers and acquisitions and equity Total Equity 6,528 7,7864 8,938 10,922 valuation services. In 2016, their operating Retained Earnings 2,232 2,739 3,592 3,062 income was increased by 7.5% and NPAT was increased by 42.5%. Dividend* (C/B)% 10/25 25/0 30/0 -/- o IDLCAML mainly manages mutual funds and Growth* (YoY): alternative investment options of retail Interest Inc. 19.6% 11.0 1.3% 0.0% customers. In the very first year of its operation Operating Inc. 6.2% 25.4% 12.6% 26.9% company earned BDT 20 mn as operating Net Profit 86.3% 17.1% 22.0% 35.2% income and BDT 10 mn as NPAT. Loans & Adv. 15.0% 17.3% 12.8% 8.65% Management: Arif Khan (CEO and Managing Director), Deposits 21.2% 30.1% 3.6% 10.88 Aziz Al Mahmud (Chairman). Equity 21.7% 19.3% 14.8% 22.2%% Shareholding Pattern: Margin: % Company Sponsor/ Govt Institute Foreign Public EBITDA 64.3% 61.2 62.9% 62.3% Director NPAT 34.1% 31.8% 34.5% 36.7% As on Jun 30, 2016 59.66% 0.00% 23.31% 3.44% 13.59% Financial Indicators: % As on Dec 29, 2016 59.66% 0.00% 21.88% 4.25% 14.21% As on Mar 31, 2017 59.66% 0.00% 20.54% 4.04% 15.76% Loan/Deposit 1.3 1.2 1.3 1.3 Asset/Equity 9.0 9.4 8.9 8.1 Performance of IDLC’s competitors listed in DSE: Assets/Liabilities 1.1 1.1 1.1 1.1 Company Paid up NPAT OE/OI Loan/ EPS (BDT) NPL 2.02 3.06 2.98 2.79 (mn) (mn) Deposit LANKABAFIN 3,183 796 59.9% 1.3 2.87 40.0%% 35.9 38.0% 34.7% Operating Exp. Ratio IDLC 3,771 2,406 34.7% 1.3 6.38 Profitability: % UNITEDFIN 1,697 313 47.7% 1.1 1.84 ROA 2.3% 2.2% 2.3% 2.7% UTTARAFIN 1,252 829 10.0% 1.4 6.62 ROE 20.9% 20.4 21.3% 22.0% DBH* 1,219 829 22.9% 1.0 6.80
Valuation: % Re. EPS (BDT) 3.30 3.87 4.72 6.38 Investment Insight Re. NAVPS (BDT) 17.31 20.65 23.70 28.97 Company Positive The NPL of the company during the 1st quarter of 2017 was
Company Overview 2.79% and was 2.98% at the end of 2016. Current NPL is the lowest in overall financial service industry of Company Profile Bangladesh. IDLC Finance Limited was established in 1985 and started The overall portfolio of IDLC grew by 5.69% in March ‘17 leasing business from 1986. In 1997 it expanded its activities to BDT 67,651 mn from that of Dec ‘16. Assets under SME into “short term finance” (factoring of accounts receivables grew sharply by 11% and Consumer Loan portfolio grew and work order financing) and “real estate finance”. It also by 4%.
1 EBL Securities Limited Research
Equity Note on IDLC Finance Limited (IDLC) Date: May 04, 2017 Resistance: 75.90 MFI: 38.59 Current Price (BDT): 72.70 Support: 71.14 RSI: 52.60
Up to March ‘17, term deposit accounted for 66.59% of BSEC has already provided approval for IDLC Balanced the total liability basket and downward repricing of Fund and company management expects to launch this deposit rates strategy will enable the company to retain product by May, 2017. Besides in 2017, company will open current cost of fund (9.11% at the end of 2016). branches in Rajshahi, Barishal, Chowmuhony, Faridpur Net profit of the company grew at a CAGR of 21.6% over and Elephant Road. the last 5 years. While ROA and ROE show a slightly IDLC will constantly devote its effort to retain current uptrend than that of previous periods. growth in customer assets (loans and advances) which is IDLC increasingly concentrates their loan portfolio on high funded primarily by deposit growth (term and other yielding SME financing and 5-years CAGR of SME loan deposits contribute 77% total funding of IDLC) and this portfolio shows 22.61% growth and currently stood at BDT growth will continue in coming periods as well. 28,798 mn. Capital Adequacy ratio of the company is 13.65% up to Five Year's Restated EPS (BDT) March ’17 (group) remained much higher than the regulatory requirements of 10%. 6.4 IDLC Finance Limited has created a strong brand image 4.7 and is the leading NBFI in Bangladesh, currently they have 3.9 36 branches and booths. 3.3 Company management expects to launch “IDLC Balanced 1.8 Fund” within May, 2017. Both commission and fee income from asset under management will increase. The company has a good dividend paying history and regularly pay dividend to shareholders. 2013 2014 2015 2016 2017A
Investment Concern Q1, 2017 profitability was mainly driven by capital market Quarterly Restated EPS (BDT)
operation of the company. On YoY basis, company fees 1.78
1.60 1.60 1.38 1.38
and other income was increased by 45% to BDT 356 mn 1.36
1.22 1.22
1.16 1.16
1.13 1.13
0.96 0.96 0.93 0.93
and Investment Income was increased by 266% to BDT 0.88 0.82 0.82
333 mn. Thus any major capital market correction will 0.39 0.39 affect company’s profitability in coming periods. Net Interest Income shows a stagnant growth on YoY basis (0.12)
mainly due to downsized interest rate in the market and
Apr-Jun Apr-Jun Apr-Jun
Jul-Sept Jul-Sept Jul-Sept
Oct-Dec Oct-Dec Oct-Dec
Jan-Mar Jan-Mar Jan-Mar Interest Income was also decreased by 1.42% during Q1 of Jan-Mar 2014 2015 2016 2017 2017. Shrinkage in interest rate will lower company net
income in coming periods. Operating expenses increased by 32.23% in Q1 of 2017 on YoY basis. Both salary and administrative costs were Price-Volume Movement of IDLC 80 VOLUME CLOSEP* 7,000,000 increased and these will absorb significant portion of 6,000,000 operating income in coming quarters. 75 5,000,000 70 Management Discussion and Talkies 4,000,000 65 IDLC finance will continue their current growth in loan 3,000,000 portfolio and will focus on the downward repricing of 60 2,000,000 deposit rates commensurate with market conditions. 55 1,000,000 NPL management will remain company key focus with significant investment in IT as well as in Human Resource 50 0 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 development.
2 EBL Securities Limited Research
Equity Note on IDLC Finance Limited (IDLC) Date: May 04, 2017 Resistance: 75.90 MFI: 38.59 Current Price (BDT): 72.70 Support: 71.14 RSI: 52.60
Statement of Consolidated Income (BDT, mn)
2013 2014 2015 2016 2017 Interest Income 6,215.8 7,431.9 8,251.2 8,359.7 8,348.4 Interest expenses 4,137.6 4,543.1 4,833.2 4,622.4 4,549.0 Net interest income 2,078.2 2,888.8 3,418.0 3,737.4 3,799.4 Investment income 53.5 48.4 372.1 476.0 1,332.1 Commission and brokerage 289.8 359.1 356.9 441.3 884.8 Other operating income 341.0 361.5 440.9 511.9 540.3 Total operating income 2,762.5 3,657.7 4,587.9 5,166.6 6,556.6 Salaries and allowances 580.1 673.1 899.2 1,048.1 1,240.8 Rent, taxes, insurance, electricity 105.9 121.7 135.7 215.9 203.6 Legal expenses 10.5 8.6 16.1 18.7 37.6 Postage, stamp, telecommunication 32.3 34.1 35.0 34.0 33.7 Stationary, printing, advertisement 83.6 115.0 85.7 98.7 143.6 Managing director's salary and benefit 13.1 13.1 11.5 8.9 13.4 Director's fee 1.0 1.1 1.4 1.9 1.6 Auditor's fee 0.7 0.7 0.7 1.0 1.0 Depreciation and repair of company's assets 159.8 164.3 178.3 199.9 207.1 Other expenses 257.6 331.8 284.2 334.8 389.5 Total operating expenses 1,244.5 1,463.6 1,647.8 1,961.8 2,271.7 Profit before provision 1,518.0 2,194.1 2,940.1 3,204.8 4,284.9 General Provision (12.4) 45.0 49.2 48.7 104.1 Specific Provision 197.2 (55.3) 276.0 167.6 282.7 Provision for diminution in value of investments 8.1 17.9 (13.6) (60.5) 21.1 Total provision 192.8 7.5 311.6 155.8 408.0 Total profit before taxes 1,325.2 2,186.5 2,628.5 3,049.0 3,876.9 Provision for taxation 655.7 941.0 1,169.3 1,268.7 1,471.1 Current tax 637.0 959.6 1,171.6 1,269.8 1,471.1 Deferred Tax 18.7 (18.6) (2.4) (1.1) - Net profit after taxation 669.5 1,245.5 1,459.2 1,780.3 2,405.8 Non-Controlling Interest - - - - - Net Profit to Shareholders 669.5 1,245.5 1,459.2 1,780.3 2,405.8
EPS 1.8 3.3 3.9 4.7 6.4
3 EBL Securities Limited Research
Equity Note on IDLC Finance Limited (IDLC) Date: May 04, 2017 Resistance: 75.90 MFI: 38.59 Current Price (BDT): 72.70 Support: 71.14 RSI: 52.60
Statement of Financial Position (BDT, mn)
2013 2014 2015 2016 2017
PROPERTY AND ASSETS Cash 744.5 728.9 891.9 976.2 952.5 In hand 0.3 0.3 0.4 0.4 0.4 Balance with Bangladesh Bank 744.2 728.6 891.5 975.8 952.1 Balance with other banks and Fis in Bangladesh 7,111.4 7,256.0 12,543.3 10,377.2 - Money at call and short notice - - - - 13,083.6 Investment 786.6 2,636.0 3,392.5 4,348.3 4,887.9 Government - 300.0 300.0 - 4,887.9 Others 786.6 2,336.0 3,092.5 4,348.3 - Loans, advances, leases 40,941.3 47,069.0 55,211.8 62,264.9 67,651.4 Fixed assets including land, building, furniture and fixtures 395.7 380.5 537.1 654.3 626.6 Other assets 449.9 856.1 857.9 738.3 791.3 Total assets 50,429.4 58,926.6 73,434.5 79,359.1 87,993.4 LIABILITIES AND CAPITAL Borrowings from other bank and Fis 8,827.9 9,198.0 10,585.6 12,564.4 13,407.3 Deposits and other accounts 30,187.4 36,595.1 47,624.6 49,324.3 53,384.7 Term deposits 29,063.9 35,240.3 46,038.7 47,474.9 51,318.9 Other deposit 1,123.6 1,354.8 1,585.9 1,849.4 2,065.8 Other liabilities 6,051.3 6,605.6 7,438.3 8,532.6 10,279.6 Total liabilities 45,066.6 52,398.8 65,648.5 70,421.3 77,071.6 Capital/shareholders' equity 5,362.8 6,527.8 7,786.0 8,937.8 10,921.8 Paid-up capital 1,608.8 2,010.9 2,513.7 2,513.7 3,770.5 Share Premium 3.8 3.8 3.8 3.8 1,260.6 Statutory reserves 1,003.3 1,234.0 1,482.7 1,782.0 1,782.0 General Reserves 811.3 1,000.0 1,000.0 1,000.0 1,000.0 Dividend equalization reserves 46.5 46.5 46.5 46.5 46.5 Retained earnings 1,889.3 2,232.7 2,739.3 3,591.9 3,062.2 Non-controlling interest - - - - - Total liabilities and Shareholders' equity 50,429.4 58,926.6 73,434.5 79,359.1 87,993.4 Net Asset Value (NAV) per share 14.2 17.3 20.7 23.7 29.0
4 EBL Securities Limited Research
Equity Note on IDLC Finance Limited (IDLC) Date: May 04, 2017 Resistance: 75.90 MFI: 38.59 Current Price (BDT): 72.70 Support: 71.14 RSI: 52.60
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