Hong Leong Finance

Hong Leong Finance: Reported 1Q12 net profit ofS$16.7m, -37% YoY. Whilst pre-provisioning operating profit was down a less severe 12% YoY to $21.3m, provisions of $1.2m (vs 1Q11’s write-back of $7.6m) contributed to the severe earnings contraction. DMG cut FY12 net profit forecast by 17% to $67.2m to reflect the 1Q12 weakness, as well as expectations of continued weakness in net interest income, as pricing for lending products remained under pressure. On a positive note, loans expanded 6.3% and deposits rose 8.2% QoQ, reflecting the balance sheet growth. House maintain TP of $2.42, which is pegged to 0.65x book. Neutral recommendation re-iterated.