PublicInvest Research said it remains confident in CIMB’s ability to rebuild its stock broking franchise.
PETALING JAYA: The disposal of CIMB Group
Holdings Bhd’s remaining stakes in its stockbroking businesses is expected to be “neutral” on the group’s earnings.
CIMB had announced that it had completed the sale of its remaining stake in brokerage CGS-CIMB to China Galaxy Securities.
This followed the divestment of its 25.01% stake in CGS-CIMB Securities International and 25% stake in CGS-CIMB Holdings to CGS International Holdings, which is a subsidiary of China Galaxy.
CIMB will receive about RM780mil from the sale, taking the total proceeds for the sale of its 100% original stockbroking business to about RM2.5bil.
However, Maybank Investment Bank Research (Maybank IB) said it “does not expect a profit and loss impact from this disposal, as CIMB had fully recognised all potential gains earlier on”.
Recall that CIMB and CGS International had set up a regional stockbroking joint venture in 2018, with both parties holding a 50% stake.
The deal included put and call options for CGS International to acquire CIMB’s stake in the CGS-CIMB joint venture over time.
In December 2021, CIMB sold 24.99% and 25% of its shareholding in CSI and CCH respectively to CGS International, under the latter’s first call option.
With the latest disposal, CIMB will not have a stockbroking entity within the group until the potential acquisition of KAF Equities Sdn Bhd, which was disclosed last year.
According to Maybank IB, there could be some uplift to capital from the sale.
However, it expects this gain to be largely offset by the potential acquisition of KAF Equities for an indicative cash consideration of RM147.94mil.
As it awaits further developments with regard to the expected acquisition of KAF Equities, Maybank IB said it is maintaining CIMB’s target price of RM6.70, backed by a financial year 2024 estimated price-to-book of one time and return on equity of 10.2%.
Meanwhile, PublicInvest Research said it remains confident in CIMB’s ability to rebuild its stock broking franchise and is also optimistic over its medium-to-long-term banking-related prospects with the banking group continuing to reap the rewards from its past and ongoing transformative initiatives.
It noted that while KAF Equities registered losses of RM6mil and RM1.3mil in its financial years 2023 and 2022, respectively, the financial impact is inconsequential once the entity is eventually consolidated into CIMB.
“We remain positive about this transaction, however, and see the group reaping synergistic benefits over the medium-to-longer term from the combination of the two franchises and the eventual rebuilding of its stockbroking business,” said PublicInvest Research.
The proposed acquisition of KAF Equities received the nod of Bank Negara in August 2023, while approval from the Securities Commission is still pending.
