News

Appointed Mike Chan Cheong Yuen as MD / CEO of its Investment Banking (IB) entity.

Mike was previously Officer-in-Charge of the enlarged RHBIB upon completion of the merger with OSKIB. He has 21 years of experience in the financial services industry in both foreign and local institutions.

He joined in 2010 and played an important role in the merger and integration of RHBIB-OSKIB.

Financial impact

None.

Pros / Cons

Given that this is an internal progression and promotion, we see little change in the overall strategy of the group (especially the IB unit) as majority of the senior management are intact.

It should come as relieve given that this position has been vacant for some time now and should provide more clarity in terms of strategy, line of reporting and line of sight.

Moreover, it also reduces the uncertainties of CEOs vacancies at the various operating units of the group.

Main focus, resources and human capital of the IB unit will now be reconvened to achieve its ambition of becoming “a leading multinational financial services group in the ASEAN region and Hong Kong”.

Risks

Unexpected jump in impaired loans and lower than expected loan growth as well as impact from Basel III.

Forecasts

Unchanged but subject to downward revision post 2QFY13 results announcement, to reflect the additional provisions in 2QFY13 for loans to Malaysian AE Models, in addition to the provisions made for the same company in 1QFY13.

Rating

BUY

Positives - Valuations still lagging behind peers; transformation bearing fruits with expanding regional footprint, reflected in strong loan growth and improving asset quality; “Easy” contributing to higher market share in retail segment; and tie-up with Pos M’sia.

Negatives - Lack of liquidity, short term dilution from the acquisitions of OSK and potentially Mestika as well as the recent development where it was hit by default of Malaysian AE Models.

Valuation

Target price maintained at RM10.08 (but subject to downward revision as a consequent of our anticipated downward revision in forecasts as mentioned above) based on Gordon Growth with ROE of 12.4% and WACC of 10.3%.

Source:Hong Leong Investment Bank Research - 16 Aug 2013