- We are downgrading our rating on CIMB Group Holdings Bhd
(CIMB) to HOLD from BUY, with an unchanged fair value of RM8.00/share, based on
an ROE of 14.9% FY12F and fair P/BV of 2.1x.
- The change in our recommendation is due mainly to share price
outperformance which leads to a less than 15% upside to our fair value
currently.
- At our recent company visit, CIMB alluded to slowing consumer
loans, but expects this to be offset by its SME loans division which has
already been reorganised.
- We also expect a stronger corporate loans pipeline, with the
rollout of major ETP projects, as well as increased participation in syndicated
loans this year. CIMB had articulated a loans growth target of 16% FY12F
earlier this year.
- In terms of the overall outlook for the investment banking
pipeline, it believes that the year’s pipeline should be strong given there
will be several new big IPOs coming onstream.
- These are likely to be Felda Global Ventures Holdings Sdn Bhd
(Felda), which is scheduled to be listed in June 2012.
- Besides this, there is also the planned IPOs for Khazanah Nasional
Bhd’s healthcare group, Intergrated Healthcare Sdn Bhd and MMC Corp Bhd’s unit,
Gas Malaysia Bhd.
- While there were no updates on the bond division in this company
visit, we foresee a strong contribution from the division in 1QFY12, based on
Projek Lebuhraya Usahasama Bhd’s (PLUS) issuance of RM30.6bil bonds in January
2012. CIMB Investment Bank Bhd was the financial adviser, sole principal
adviser and lead arranger, and joint lead manager for the transaction.
- We expect CIMB to post decent net earnings in 1QFY12, which
if annualised will likely be close to consensus’ net earnings forecasts of
RM4,219mil FY12F (our forecast: RM4,014mil).
- CIMB’s share price had moved up from the low of circa RM6.80
in 4Q11. At the current price level, the stock is trading at less a than 15%
upside to our fair value.
- Key re-rating catalysts are: (a) ability to sustain asset quality;
(b) continuing improvement in CASA deposit; (b) sustainable non-interest
income.
Source: AmeSecurities
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