The Edge Weekly reports of a high chance that the CIMB-RHB-MBSB merger may be called off on grounds that (i) RHB shareholders want a cash cum shares deal as opposed to an all shares deal, (ii) the economic situation and operating environment have become much more difficult thus cost synergies would be harder to realize.
With a CET1 ratio that is just adequate at 9.5%, we do not see a cash cum shares deal as palatable to CIMB. CIMB’s and RHB’s share prices are 30% AND 21% off their 52 week highs, and CIMB’s foreign shareholding has declined to just 32.7% end-Dec 2014 closing in to its post-GFC trough of 31.6%. We may thus see a bounce in share prices if the deal is off.
We do think however, that the selldown on CIMB has been mainly a function of its poor results and Indonesian concerns, rather than the merger. Amid weak capital markets and ongoing concerns over CIMB Niaga, we expect CIMB’s earnings to be subdued this year . The group’s 4Q14 results (due out before 12 Feb), could fall short of consensus expectations due to higher provisions. Our FY14 and FY15 net profit forecasts are 8% and 10% lower than consensus.
We still prefer RHB (BUY) for even if the deal is called off, RHB offers better earnings visibility , cheaper valuations - FY15 PER of 9.6x (CIMB: 10.7x), P/BV of 1x (CIMB: 1.1x) for similar 10.8% ROE.
The impact of a call-off of the deal on MBSB (MBS MK, Not Rated) would likely be slightly negative with downside bias to its premerger price of around MYR2.20. Current valuations, at MYR2.46, are not demanding (end-Dec 2014 P/BV of 1.7x; 18% ROE).
Source: Maybank Research - 12 Jan 2015
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8illionaire
i think someone forgot abt the 1mdb exposure. tsk tsk. if 1mdb defaults, and that is an "if" (i do not want it to default), it would affect rhb the most.
2015-01-12 16:10