CIMB Group (Hold) - Opportunistic Buy For The Next Leap

CIMB Group (Hold)

Opportunistic Buy For The Next Leap

• CIMB to acquire RBS’ ECM, CF and cash equities businesses in 10 countries APAC for £173.9m cash or 1.07x P/NTA.  After deducting £13.8m payment from RBS total payment reduces to £160.1m or 0.98x P/NTA.
• Financials not available but CIMB expects marginal dilutive in FY12 and accretive in FY13 with minimal impact on capital ratios given the highly liquid assets to be acquired.
• Opportunistic acquisition with good pricing in view of the current financial crisis.
• Positive - immediately propel CIMB from an ASEAN to a number one APAC based IB player and immediately increase presence in most key markets in APAC. 
• Its M&A track record imply huge opportunity to replicate strengths (from both sides).
• While deal is relatively small, it is in position to take the next leap to enhance long-term returns and entrench presence in APAC.
• Maintain Hold.
• Target price maintained at RM7.78 (Gordon Growth with ROE of 16.3% and WACC of 10.5%).

Source: HLIB Research - 3 April 2012