CIMB Research has target price of RM6.20 for RHB Bank
KUALA LUMPUR: CIMB Equities Research has started coverage of RHB Bank with an Add call as it expects benefits from the banking group’s IGNITE 17 transformation programme and potential regional expansion.
RHB Bank was listed on June 28, 2016, taking over the listing status of RHB Capital (RHBC). As such, we are transferring our coverage from RHB Capital to RHB Bank.
This marks the completion of the group’s internal reorganisation (InR) to collapse its organisational structure. Under the exercise, for every one RHB Capital share held, RHB Capital shareholders will get 1.3 RHB Bank share. RHB Bank houses all the major entities of RHB Capital and, hence, its revenue base is similar to that of RHB Capital.
“The new listing entity, RHB Bank, has a bigger share base of 4.01bil shares compared to 3.07bil shares for RHB Capital. Hence, the share price was adjusted downward from RM6.10 for RHB Capital which was the close during its last day of trading on May 30 to a reference price of RM4.68 for the listing of RHB Bank on June 28. Both translate to same market capitalisation of RM18.8bil,” it said.
To recap, following the completion of the internal reorganisation, RHB will continue with its IGNITE 17 transformation programme, focusing on: (1) improving its market share in the SME segment; (2) driving the businesses that generate fee income such as treasury, etc; and (3) achieving greater operating efficiency.
CIMB Research raised the projected FY16-18F net profit by 1% as it factored in RM30mil in savings on taxation following the completion of the internal reorganisation. However, it lowered its FY16-18 EPS forecasts by 12%-22% for RHB Bank compared to those for RHB Capital due the higher share base for the former.
“Consequently, our dividend discount model based target price (TP) is now RM6.20 (for RHB Bank), compared to our previous target of RM8 (for RHB Capital),” it said.
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