Affin Hwang Capital Daily Insight (LV) - 10 October 2014 - BANKING / SIME / SIME / ECONOMY - ASEAN OUTLOOK / DMR

Top Calls

Sector Update � Banking (NEUTRAL, maintain) - A mega deal with a hefty premium RHB Capital will be the main vehicle for the RM68bn merger with CIMB Group and MBSB. There will also be a reorganisation of the enlarged group�s Islamic financing assets, to be housed under CIMB Islamic Bank. In our view, there will be a significant re-rating in MBSB�s share price by +19% given a higher premium (1.87x P/BV) attached to the acquisition price of RM2.82 (with a cash or unlisted share option). The acquisition premium for CIMB�s shares (at 1.7x P/BV) represents a +4% premium over the last closing. In our view, key challenges to the merger include execution strategies to realize the desired synergies and getting shareholder approval of the deal.

Other Calls

Company Update � Sime Darby (ADD, upgrade) - High acquisition PE dilutes EPS enhancement

Company Update � Parkson (REDUCE, upgrade) - Outlook still challenging; upgrade on valuation

Economy � ASEAN Outlook � Weekly Wrap (3 � 9 Oct 2014) - Thailand cut its GDP growth forecast to 1.7% for 2014

Debt Market Research - Fed induced volatility & budget could be supportive for govvies

Morning News & Market Summary