CIMB retains Add for RHB Capital

KUALA LUMPUR: CIMB Equities Research is maintaining its Add recommendation for RHB Capital and its top pick for the sector due to its robust loan growth, market share gains in its investment banking business, and swift expansion in Singapore.     

It said on Monday that the current RHB Capital Group managing director Kellee Kam who will be leaving the group on May 4, had stated in news report the group does not have immediate plans for M&As.

Kam had stated the group would focus on improving its cost/capital efficiency via its IGNITE 17 transformation programme.

“The implementation of the programme would also help the group to improve the areas that it is traditionally weak in. Our dividend discount model-based target price (cost of equity of 11.8%; long term growth of 4%) is intact,”  it said.

RHB Cap had revised its target for overseas contributions from 30% to 20% after its bid to acquire Bank Mestika in Indonesia was called off last year and it currently does not have any M&A plans.

“The above would be slightly negative as it spells a slower pace in regional expansion. However, the group is still adamant about building a full-fledged ASEAN network in the longer term, eyeing entries into Indonesia and the Philippines.   

“Hence, the earnings drivers in the near term will come from (1) organic growth, especially given the robust loan growth of 17% in 2014, and (2) benefits from its IGNITE 17 transformation programme.

“We are positive that under the programme, the group aims to improve the areas that it is weak in traditionally, such as Islamic banking, SME, treasuries and wealth management.

“The focus has borne fruit, with a total value of RM425mil (in the forms of additional revenue and cost/capital savings) captured in 2014.   Stay invested in view of the group’s bright earnings prospects, arising from its swift loan and fee income growth,” CIMB Research said.