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Thursday, September 21, 2017

Maybank IB Research retains Buy on CIMB, target price RM7.50

Thursday, 21 Sep 20179:10 AM MYT

KUALA LUMPUR: Maybank Investment Bank Research is maintaining its Buy call on CIMB Group Holdings Bhd and target price of RM7.50, pegging 2018 valuations to a price-to-book value (P/BV) of 1.3 times and return on equity (ROE) of 10.6%.

It said on Thursday Mitsubishi UFJ Financial Group’s banking entity, The Bank of Tokyo-Mitsubishi UFJ’s (BTMU) disposal of its 4.6% stake in CIMB at a discount to market price has caused some near term share price weakness.

“But fundamentals of the group remain intact, with the prospect of improving ROEs into 2018.

“CIMB is one of only two financial institutions in our portfolio that are expected to see improved ROEs into 2018 and this in itself, warrants a re-rating of the group. FY17 dividend yield of 4.1% provides support,” it said.

BTMU disposed of 412 million CIMB shares via an overnight block trade at RM6.20 a share; this being a 4% discount to Tuesday’s closing price of RM6.46, raising proceeds of about RM2.56bil.

According to MUFG’s announcement, the group is looking to optimise capital management and is conducting a review of existing strategic investments by MUFG group of companies from the viewpoint of strategy, capital efficiency and profitability of investment, among others.

BTMU’s CET1 ratio was 11.3% as at end-June 2017 and we estimate a slight enhancement to 11.4% from this sale.

“CIMB’s share price has weakened by about 6% from Monday’s close of RM6.69, in response to this transaction, we believe.

“This enhances the attractiveness of the stock, in our view, especially since fundamentals remain intact. We continue to forecast an expansion in ROE to 10.6% in FY18 from 9.6% in FY17 and this justifies the re-rating of the group,” said Maybank Research.


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