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| | | | | | | | | | | | | | | | Share Price: | MYR6.75 | Target Price: | MYR7.50 | Recommendation: | Buy | | |
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| | | To acquire Jupiter Securities | | Jupiter Securities offers CIMB Group a platform for injecting in its domestic stockbroking business. This then facilitates the sale of a 50% stake in the group's entire stockbroking business to China Galaxy Securities (CGS). We expect an eventual enhancement to the group's overall cost/income ratio (CIR) from this sale but with minimal impact to earnings. We maintain our BUY call on CIMB, and TP of MYR7.50, pegging 2018 valuations to a P/BV of 1.3x (ROE: 10.6%). | | |
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| | FYE Dec (MYR m) | FY15A | FY16A | FY17E | FY18E | Operating income | 15,395.8 | 16,065.3 | 17,022.2 | 18,119.9 | Pre-provision profit | 6,146.8 | 7,413.6 | 8,155.8 | 8,984.3 | Core net profit | 3,411.2 | 3,414.4 | 4,440.2 | 5,151.8 | Core EPS (MYR) | 0.40 | 0.39 | 0.50 | 0.58 | Core EPS growth (%) | 5.6 | (2.4) | 27.4 | 16.0 | Net DPS (MYR) | 0.14 | 0.20 | 0.26 | 0.30 | Core P/E (x) | 16.8 | 17.2 | 13.5 | 11.6 | P/BV (x) | 1.4 | 1.3 | 1.3 | 1.2 | Net dividend yield (%) | 2.1 | 3.0 | 3.9 | 4.4 | Book value (MYR) | 4.87 | 5.24 | 5.37 | 5.65 | ROAE (%) | 8.7 | 7.9 | 9.6 | 10.6 | ROAA (%) | 0.8 | 0.7 | 0.9 | 1.0 |
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| | | | | SECTOR RESEARCH | | | | | | | Impact of Tropical Storm Harvey
by Mohshin Aziz |
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| | | | | | Tropical Storm Harvey that befell the Gulf of Mexico had significantly crippled the USA petrochemical industry. The country has 22% global market share of Ethylene production, and according to PetroChemWire, 61% of US Ethylene plants were closed at the height of the storm. This has disrupted the global supply-demand balance and product prices are likely to rise in the near future. This episode boosts our POSITIVE stance as well as our BUY calls on PCHEM and Lotte Chemical Titan. | |
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| | | | | | | | A decent 2Q17 for banks
by Desmond Ch'ng |
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| | | | | | 2Q17 domestic loan growth was slower than expected and we thus lower our 2017 industry loan growth forecast to 4.7% from 5.4%. Nevertheless, our sector core earnings forecasts are generally maintained with projected 2017/2018 operating profit growth forecasts of 6.5%/5.9% and 12.1%/7.1% at the net profit level. We maintain our NEUTRAL call on the sector and our BUYs on CIMB and BIMB. | |
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| | | | MACRO RESEARCH | | | | | | | Above USD100b
by Suhaimi Ilias |
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| | | | | | Total gross external reserves rose marginally to USD100.5b at end-Aug 2017 (mid-Aug 2017: USD100.4b), equals to 7.8 months of retained imports and 1.1 times the short-term external debt. Year to date, external reserves rose +6.2% from USD94.6b at end-Dec 2016. Reserves continued to grow despite the more subdued portfolio capital flows, especially supported by trade flows. | |
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| | | | | | | | Calendar effect at work
by Suhaimi Ilias |
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| | | | | | Export and import growth in July 2017 surged to +30.9% YoY and +21.8% YoY respectively from the slower growth of +9.9% YoY and +3.7% YoY in June 2017, reflecting calendar effect as the fasting month Ramadhan and Eid celebration fell between 27 May and 26 June this year vs between 6 June and 7 July last year. Trade surplus jumped +282.4% YoY to +MYR8.0b (June 2017: +MYR9.9b). | |
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| | | | | | | | S&P 500 Index: Support Remains Firm
by Nik Ihsan Raja Abdullah |
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| | | | | | FBMKLCI bucked the regional downtrend to end the day 2.85pts higher at 1,772.48. Market breadth, however, was mixed with losers outpacing gainers by 419 to 418. A total of 2.21b shares worth MYR1.81b changed hands. With US markets ended firmer overnight after President Donald Trump and lawmakers reached a deal to extend the deadline on the debt ceiling by three months, local bourses could benefit from the positive spill-over. | |
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| | NEWS | | | Outside Malaysia:
U.S: Trade deficit widened less than forecast in July as rising energy and aircraft exports helped offset drops in shipments of autos and household goods, Commerce Department data showed. Gap increased 0.3% to USD43.7b (est. USD44.7b). Exports fell 0.3% to USD194.4b, led by drops in passenger cars, consumer goods. Imports declined 0.2% to USD238.1b on crude oil, passenger cars, pharmaceutical preparations. Merchandise-trade deficit was little changed at USD63.9b. The report may represent the clearest picture of international trade before Hurricane Harvey -- and potentially Hurricane Irma -- distort data from August on. (Source: Bloomberg)
U.S: The expansion in service industries in August indicates the biggest part of the U.S. economy regained its footing after a soft month, a survey from the Institute for Supply Management showed. Index rose to 55.3 (est. 55.6) from 11-month low of 53.9 in July. Measure of new orders advanced to 57.1 from 55.1. Employment gauge climbed to 56.2 from 53.6. While the main gauge was slightly below its average for this year, the results show the abrupt slowdown in July was temporary, and underscore sustained demand for services that account for about 90 percent of the economy and span industries such as utilities, retailing, health care, and construction. (Source: Bloomberg)
Brazil: Central bank lowered borrowing costs by a full percentage point for a fourth straight meeting and indicated it would start to reduce the pace of easing. The bank's board, led by President Ilan Goldfajn, voted unanimously to cut the benchmark Selic by a full point to 8.25%. In the statement accompanying the decision, central bankers wrote, "regarding the next Copom meeting, provided the Committee's baseline scenario evolves as expected, and taking into account the stage of the monetary easing cycle, at this time the Copom views a moderate reduction of the pace of easing as appropriate. In addition, under those same circumstances, the Copom foresees a gradual ending to the cycle." (Source: Bloomberg) | |
| | | | | Other News:
Econpile: Proposes two-for-one share split, bonus share issue. Econpile Holdings has proposed a one-to-two share split, together with a bonus issue on the basis of one bonus share plus one free warrant, for every four split shares held.The warrants will have a five-year tenure, said Econpile. Year to date, shares of the piling company has appreciated 63.93% to its last closing price of MYR3. (Source: The Edge Financial Daily)
Berjaya Assets: Proposes 1-to-2 share split. The group has proposed to undertake a share split involving the subdivision of every one existing ordinary share in BAssets into two BAssets shares. The proposed share split is expected to improve the trading liquidity of BAssets shares as a result of the increase in the number of shares in issue. (Source: The Sun Daily)
Berjaya Assets: Proposes 1-to-2 share split. The group has proposed to undertake a share split involving the subdivision of every one existing ordinary share in BAssets into two BAssets shares. The proposed share split is expected to improve the trading liquidity of BAssets shares as a result of the increase in the number of shares in issue. (Source: The Sun Daily) | |
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