CIMB Group is the fifth largest banking group in Asean (by assets), with an extensive regional footprint and a commendable universal-banking franchise.
KUALA LUMPUR: PublicInvest Research is positive on CIMB's minor stake sale in CIMB-Principal Asset Management Sdn Bhd and CIMB-Principal Islamic Asset Management Sdn Bhd.
It has retained its trading buy call on the counter with targt price raise to RM7 from RM6.60 previously on changes to its dividend assumptions.
The sale will see a disposal gain of about RM950mil and a 0.18% improvement to CIMB's Common Equity Tier-1 (CET1) ratio.
"We are positive on this deal, with improvements to capital ratios and a possibly stronger-than-expected improvement in its core banking-related earnings mitigating any potential loss in earnings (~RM20m) from the dilution in these stakes.
There also remains scope for further earnings upside should the Group’s regional exposures make quicker-than-expected turnarounds."
According to PublicInvest Research, the group has been undertaking a series of disposals in recent months to realign its operations amid a changing and more competitive landscape.
"This current CIMB-Principal transaction is another value accretive move, improving its capital ratios with no significant impact to earnings from the dilution in stakes.
"We laud management’s initiatives and are growing increasingly optimistic of its medium to longer-term prospects. The anticipated worst-case 50bps negative impact from the adoption of MFRS9 on its CET-1 is more than likely inconsequential, we think."
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