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Tuesday, August 31, 2010

KLCI Stock - CIMB / 1023 - 2010 Quarter 2

Market Cap : 7331529820*7.8 = 57,185,932,596 (Very Large)
NTA per share : (20686345-7646241-1603832)/7118009 = 1.61
P/BV : 7.8/1.61 = 4.8447
Forecast P/E now : (7.8-0.14)/0.55 = 13.93 (Moderate)
ROE : 14.47% (Moderate)
DY : 0.14/7.8*100 = 1.79% (Low)
Fixed Asset Turnover : Not applicable
Liquidity Ratio : Not applicable
Receivables Collection Period : Not applicable
My Target Price : 8.36+0.14 = 8.5 (PE 15.2, EPS 0.55, DPS 0.14)
My Decision : BUY
My Comment : Revenue and profit increasing, cash decreasing, navps increasing, increasing regional market, BLR increased, economic remain good
Technical Support Price : 7.3
Risk Rating : LOW
OSK Target Price : 8.7 (27 Aug 10)

My notes based on 2010 quarter 2 report (number in '000):-

- The Group 1H10 revenues increased by 14.9% Y-o-Y while PBT was 34.8% higher

- For 1H10, the Group’s Malaysian consumer bank PBT grew 23.5% Y-o-Y from a combination of sustained improvements in Retail Banking and Credit Cards as well as better recoveries at Group Special Assets Management(“GSAM”). PBT at Treasury & Investments declined 25.3% Y-o-Y mainly due to lower net gains from investments during the period. Corporate & Investment Banking (“CIB”) PBT was higher by 72.9% Y-o-Y as regional capital markets were significantly better than 1H09

- CIMB Niaga’s contribution surged 171.1% Y-o-Y previously owing to continued operational improvements as well as very favourable operating conditions. CIMB Thai made a RM26 million PBT contribution in 1H10 compared to a RM29 million loss in 1H09. Asset Management and Insurance PBT
was 55.4% lower Y-o-Y largely due to the non recurrence of gains on change in accounting standards at CIMB Aviva last year

- CIMB Niaga was again the largest contributor to 1H10 Group PBT with 36% versus 18% in 1H09. The Malaysian Consumer Bank’s contribution to Group PBT was slightly lower at 14% compared to 15% in 1H09, while Treasury and Investments fell to 26%. Contribution from CIB rebounded to 21% from 17% previously. Group Asset Management (“GAM”) and Insurance fell to 2% from 5% last year. CIMB Thai’s contribution was 1% of Group PBT compared to a negative in 1H09

- Total non-Malaysian PBT jumped to an all-time high of 44% in 1H10 from 20% in 1H09 due to the surge in contribution from Indonesia as well as the return to profitability of the Group's Thai and Singapore operations

- The Group’s total gross loans expanded 16.1% Y-o-Y, underpinned by the 30.7% expansion (in RM terms) of CIMB Niaga’s gross loans as well as the 15.2% growth in Malaysian consumer loans. Mortgages, credit cards and the Group’s micro credit lending grew by 22.9%, 38.3% and 38.7% respectively Y-o-Y. Hire purchase loans are growing again, by 5.7% Y-o-Y but business banking loans continued to decline by 4.5% Y-o-Y. Corporate loans improved 8.7% Y-o-Y. Meanwhile, the Group's net interest margins continued to improve as well

- Total Group's deposits grew by 18.1%, driven by a 20.5% surge in CIMB Bank's retail current account balances as the Group's new Singapore retail franchise continued its excellent start. In 2Q10 CIMB Bank Malaysia registered more new customers than ever before indicating that the bank's focus on growing its deposit base is gaining momentum

- The total loan impairment (under FRS139 policies) for the Group was 52.6% Y-o-Y, the numbers are not directly comparable due to differing accounting treatments. The Group’s total annualized credit charge was 0.30%, much lower than the 0.60% full year target. The Group’s gross impaired loans ratio was 7.2% for 1H10 down from 7.5% three months ago, with an impairment allowance coverage of 78.4%. The Group’s cost to income ratio rose slightly to 54.6% compared to 53.7% in 1H09

- The Group’s 2Q10 revenues was 6.2% higher versus 1Q10, giving rise to a 6.1% increase in Q-o-Q
net profits

- The Group’s Malaysian Consumer Banking division PBT improved 52.8% Q-o-Q largely due to improved recoveries at GSAM. Excluding these legacy assets, the consumer “good bank” earnings were 5.9% higher. Corporate and Investment Banking expanded 14.7% as the capital market momentum continued but Treasury and Investments fell 18.3% Q-o-Q. CIMB Niaga’s PBT contribution was 4.5% lower Q-o-Q due to the higher gain from the ex-Lippo Bank bond sale in 1Q10. GAM and Insurance PBT contributions rose 262.5% to RM28 million. CIMB Thai’s PBT contribution jumped by 233.3% Q-o-Q to RM20 million versus RM6 million in 1Q10

- CIMB Niaga reported a 62.2% Y-o-Y growth with a 1H10. The stronger performance was attributed to the strong loans growth and improved non-performing loan (“NPL”) ratios. Profits from sale of AFS bonds by CIMB Niaga are not recognised in CIMB Niaga itself but at Group consolidated accounts. On a sequential basis, the 2Q10 net profit was 15.5% higher than 1Q10 primarily due to stronger revenue and lower operating expenses

- Bank CIMB Niaga’s gross loans grew 25.6% Y-o-Y in 1H10 driven by the corporate and auto loans segments. Gross NPL was lower at 2.7% as at end-June 2010 compared to 3.1% as end-March 2010 and unchanged versus the corresponding period last year. CIMB Niaga continues to retain the 2nd lowest position in net NPL ratios amongst Indonesian banks while loan loss coverage was increased to 140.0% as at end-1H10 compared to 96.3% as at end-1H09

- CIMB Thai announced a 1H10 net profit of THB714 million compared to a THB502 million loss in 1H09. This had included a THB508 million gain from the sale of the Sathorn building and BT Asset Management. Excluding this one-off gain, CIMB Thai would have recorded a 1H10 net profit of THB206 million. For the 6-month period, CIMB Thai chalked revenue of THB3.607 billion, up 5.6% Y-o-Y. As a result of GAAP adjustments, CIMB Thai’s contribution to the Group’s 1H10 earnings was RM26 million, compared to a negative RM29 million in 1H09

- CIMB Islamic’s Y-o-Y PBT jumped 144.6% as Syariah-compliant banking products continue to gain ground. CIMB Islamic’s gross financing assets grew 141.4% Y-o-Y, accounting for 14.3% of total Group loans. Total deposits grew by 71.9% Y-o-Y

- Estimate next 4Q eps after 2010 Q2 result announced = 0.125*4*1.1 = 0.55, estimate PE on current price 7.8 = 13.93(DPS 0.14)
- Estimate next 4Q eps after 2010 Q1 result announced = 0.2366*4*1.1 = 1.041(10% increase quarter-by-quarter), after bonus estimate eps = 1.041/2 = 0.5205, estimate highest/lowest PE = 15.19/12.46 (DPS 0.185/2 = 0.0925)
- Estimate next 4Q eps after 2009 Q4 result announced = 0.2268*4*1.1 = 0.9979, estimate highest/lowest PE = 14.67/12.5 (DPS 0.185)
- Estimate next 4Q eps after 2009 Q3 result announced = 0.2058*4*1.1 = 0.9055, estimate highest/lowest PE = 14.72/13.04 (DPS 0.25)
- Estimate next 4Q eps after 2009 Q2 result announced = 0.1879*4*1.1 = 0.8268, estimate highest/lowest PE = 15.59/11.73 (DPS 0.25)

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