Stock Name: CIMB
Company Name: CIMB GROUP HOLDINGS BERHAD
Research House: AMMB
CIMB Group Holdings Bhd
(Nov 23, RM8.31)
Maintain buy at RM8.41 with fair value of RM9.60: We are maintaining our 'buy' rating on CIMB Group Holdings Bhd with an unchanged fair value of RM9.60. Our fair value is based on an unchanged return on equity (ROE) of 17.2% in FY11F, which translates into a fair price-to-book value of 2.6 times.
CIMB reported net earnings of RM923.5 million in 3QFY10, representing an increase of 3.8% quarter-on-quarter (q-o-q) and 27.1% year-on-year (y-o-y). On an annualised basis, net earnings came in just a tad below our forecast of RM3.57 billion (-0.4%) and were in line with consensus' RM3.56 billion.
Given that 2QFY10 included a RM150 million gain from the sale of up to 65 properties to the Employees Provident Fund, we view the 3.8% q-o-q increase as resilient earnings growth.
The company declared a special net dividend of 13.45 sen in 3QFY10. This is something of a positive surprise to us, given that we had expected a special dividend to be announced in conjunction with its 4QFY10. Together with the interim dividend tax-exempt dividend per share (DPS) 4.63 sen announced in 2QFY10, this brings the total net DPS to 18.1 sen for 9MFY10. This means it is on track to meet our projected overall net DPS of 18.5 sen for FY10F.
Its absolute gross impaired loans declined 7.9% q-o-q, which is positive. The gross impaired loans ratio declined to 6.6% as at end-September from 7.2% at end-June. Loan loss cover was raised to 79.3% at end-September from 78.4% at end-June.
Elsewhere, loan growth is flattish at only 0.3% q-o-q, but we are reassured that this was related to previous short-term bridging financing in 2QFY10 which has now lapsed. Further, net interest margin declined by 15 basis points q-o-q, which we believe was due largely to lag impact from repricing of fixed deposits. We believe this is more of an industry trend, and thus do not view this negatively in the context, in relation to CIMB.
Otherwise, regional contributions from CIMB Niaga (excluding sale of ex-Lippo bonds) is higher, estimated at 25.9% in 3QFY10 (2QFY10: 24.6% 1QFYQ10: 22.4%). Total earnings contribution from regional countries has now increased to 53% in 3QFY10, from 44% in 2QFY10.
We maintain our view that CIMB is underrated for its regional banking platform. Key re-rating catalysts are: (i) a stronger than expected non-interest income; (ii) reaffirmation of a higher ROE target of 18% for FY11F; and (iii) confirmation of a higher dividend. ' AmResearch, Nov 23
This article appeared in The Edge Financial Daily, November 24, 2010.
Company Name: CIMB GROUP HOLDINGS BERHAD
Research House: AMMB
CIMB Group Holdings Bhd
(Nov 23, RM8.31)
Maintain buy at RM8.41 with fair value of RM9.60: We are maintaining our 'buy' rating on CIMB Group Holdings Bhd with an unchanged fair value of RM9.60. Our fair value is based on an unchanged return on equity (ROE) of 17.2% in FY11F, which translates into a fair price-to-book value of 2.6 times.
CIMB reported net earnings of RM923.5 million in 3QFY10, representing an increase of 3.8% quarter-on-quarter (q-o-q) and 27.1% year-on-year (y-o-y). On an annualised basis, net earnings came in just a tad below our forecast of RM3.57 billion (-0.4%) and were in line with consensus' RM3.56 billion.
Given that 2QFY10 included a RM150 million gain from the sale of up to 65 properties to the Employees Provident Fund, we view the 3.8% q-o-q increase as resilient earnings growth.
The company declared a special net dividend of 13.45 sen in 3QFY10. This is something of a positive surprise to us, given that we had expected a special dividend to be announced in conjunction with its 4QFY10. Together with the interim dividend tax-exempt dividend per share (DPS) 4.63 sen announced in 2QFY10, this brings the total net DPS to 18.1 sen for 9MFY10. This means it is on track to meet our projected overall net DPS of 18.5 sen for FY10F.
Its absolute gross impaired loans declined 7.9% q-o-q, which is positive. The gross impaired loans ratio declined to 6.6% as at end-September from 7.2% at end-June. Loan loss cover was raised to 79.3% at end-September from 78.4% at end-June.
Elsewhere, loan growth is flattish at only 0.3% q-o-q, but we are reassured that this was related to previous short-term bridging financing in 2QFY10 which has now lapsed. Further, net interest margin declined by 15 basis points q-o-q, which we believe was due largely to lag impact from repricing of fixed deposits. We believe this is more of an industry trend, and thus do not view this negatively in the context, in relation to CIMB.
Otherwise, regional contributions from CIMB Niaga (excluding sale of ex-Lippo bonds) is higher, estimated at 25.9% in 3QFY10 (2QFY10: 24.6% 1QFYQ10: 22.4%). Total earnings contribution from regional countries has now increased to 53% in 3QFY10, from 44% in 2QFY10.
We maintain our view that CIMB is underrated for its regional banking platform. Key re-rating catalysts are: (i) a stronger than expected non-interest income; (ii) reaffirmation of a higher ROE target of 18% for FY11F; and (iii) confirmation of a higher dividend. ' AmResearch, Nov 23
This article appeared in The Edge Financial Daily, November 24, 2010.
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