- We maintain our HOLD rating on CIMB Group Holdings Bhd (CIMB), with an unchanged fair value of RM8.20/share. The fair value is based on an unchanged FY14F ROE of 13.3% and an unchanged fair P/BV of 1.8x (from 2.0x).

- CIMB has announced that the issue price for the new CIMB shares to be issued pursuant to the dividend reinvestment scheme (DRS) for the first interim dividend for FY13 (single-tier dividend of 12.82sen) at RM6.90/share.

- The issue price is computed based on the five day volume weighted average market price of RM7.56 per CIMB share up to and including 17 September 2013, being the last trading day prior to the Price Fixing Date; adjusted for the gross dividend per CIMB share of 12.82 sen; and applying an approximately seven percent (7%) discount, which is equivalent to RM0.52.

- Recall that the earlier DRS price for the final FY12 single tier dividend of 18.38 sen was fixed at RM6.30 then. The discount was wider then, at 10% to the volume weighted average market price.

- CIMB further announced that it has decided to allow odd lots under this DRS as opposed to the previous DRS exercise involving its final dividend for FY12. As such, and pursuant to this DRS, shareholders may receive such new CIMB shares in odd lots.

- The entitlement date for this first interim dividend and the DRS has been fixed at 2 October 2013. The new CIMBshares arising from the DRS are targeted to be listed on the exchange on 31 October 2013.

- For the previous DRS applied to the FY12 final dividend of 18.38 sen, a total of 183mil new shares were issued representing a take-up rate of 84.4% from the estimated 217mil total eligible shares. The increase in share base was 2.4% then.

- Assuming a take-up rate of 100%, the new shares to be issued for the current DRS would be 142mil but assuming a similar take-up rate of 84%, we estimate the number of new shares to be less dilutive at 119mil. This represents a potential increase in the current share base by 1.6% to possibly 7,735mil from 7,616mil currently.

- We maintain a HOLD rating on CIMB. The catalysts that may lead to a re-rating are:- (a) stabilisation of Indonesian macro situation and assurance on asset quality; (b)confirmation of minimal marked-to-market losses for its securities portfolio; (c) indication of better capital markets.

Source: AmeSecurities