• We maintain our fair value on CIMB Group of RM6.60/share. Our fair value is based on FY18 P/BV of 1.2x on the back of an ROE of 10.4%. With the recent share price weakness, value has emerged for the stock, and with an upside potential of more than 10% from the current share price to our fair value, we are upgrading the rating on the stock from HOLD to BUY.

• The group announced that it has obtained the approval to operate a branch in the Philippines from the Monetary Board of the Bangko Sentral ng Pilipinas (BSP). After mulling over opening a branch in the Philippines to complete its footprint in Asean countries, the group has finally secured the approval from BSP. It will operate a retail branch in the Philippines by the fourth quarter of 2018. We believe that this approval will allow it to operate in the Philippines through a whollyowned banking subsidiary.

• The award of the licence is in line with the liberalization of the banking sector in the Philippines. The banking sector in the Philippines has been opened up to achieve greater financial integration and economic development among the Asean member countries.

• Eventually with this licence, the group will have presence in 10 Asean countries (Malaysia, Indonesia, Singapore, Thailand, Cambodia, Brunei, Vietnam, Myammar, Laos and the Philippines). This will strengthen the group’s products and services offerings as a universal Asean bank.

• This follows the group’s earlier success in obtaining a banking licence in Vietnam in 2016 from the State Bank of Vietnam. Recall, the licence had allowed the group to offer retail and commercial banking products in Vietnam.

• With the retail branch in the Philippines to be fully operational only by the fourth quarter of 2018, and with the need to incur start-up expenses, the impact to our projected numbers for FY18 is expected to be minimal. We maintain our forecast for now, pending the review of the group’s 3QFY17 results, which are expected to be announced on 28 November 2017.

• Among its peers, Maybank already has a presence in the Philippines via its commercial banking business under its 99.97%-owned Maybank Philippines Incorporated (MPI) as well as through its investment banking arm, Maybank Kim Eng. The operations of Maybank’s commercial banking in the Philippines are significantly larger than that of CIMB with a network of 79 branches, located in various key cities in the country.

Source: AmInvest Research - 17 Nov 2017