- We maintain our HOLD rating on CIMB Group Holdings Bhd (CIMB) with an unchanged fair value of RM7.30/share for FY14F. This is based on an FY14F ROE of 12.7% and an unchanged fair P/BV of 1.7x.

-  CIMB’s foreign shareholding inched higher to 34.4% in May 2014, from 34.3% in April 2014.

-  This is the second consecutive month of increase in percentage of foreign shareholding. However, foreign shareholding has been on a decline in the past one year, since the recent peak of 42.7% in May 2013 (see chart in following page).

-  We estimate that the net number of shares bought by foreign shareholders was 8mil shares in May 2014, compared to our estimated net buying of 111mil in April 2014.

-  On a year-to-date basis, this means that there was a net buying of 240mil shares by foreign shareholders during the January 2014 to May 2014 period. As an indication, we estimate that there was a total net foreign selling of 375mil shares for the whole of 2013.

-  Fundamentally, we continue to believe that there may be some earnings risks from net interest margin. Based on the latest quarterly results, we reckon that the key new information was Indonesian banks’ net interest margin, which may face further deposit price competition.

-  The other possible new information is CIMB’s interest in acquiring a mid-sized Philippines bank. In view of this possible M&A ahead in the Philippines, we may have to revisit our capital assumptions.

-  Maintain HOLD.

Source:  AmeSecurities