According to TheEdge Financial Daily, the proposed mega merger comprising CIMB-RHBCapital-MBSB could be called off, with an official announcement expected by this week. The Daily cited that the respective boards are supposed to meet on Wednesday when it will be formally expressed that the deal is off. (Source: The Edge Financial Daily)

Comment: Our views remain unchanged as per our note issued on 12 Jan 2014, where we also cited media speculation and factors which could lead to a potential shelving of the proposal. At this juncture, we do not expect much re-rating on CIMB (HOLD, PT RM5.00 based on 1.08x CY15 P/BV) and RHBCap (HOLD, PT RM6.90 based on 0.88x CY15 P/BV). We believe that CIMB’s share price will continue to underperform due to the risky sector exposure (at CIMB Niaga), competition in Indonesia and weaker non-interest income generation due to a lacklustre capital market. We also do not foresee strong re-rating catalyst for RHBCap owing to a slowdown in consumer spending amidst a moderation in corporate loans growth.

Nonetheless,  we note that MBSB  (BUY, PT RM2.75 at 1.46x CY15 P/BV) may  continue  to  face  some  selling  pressure  but  we  believe  that  at  this juncture, share price remains undervalued  at a CY15 P/E of 7x. We do see a support for MBSB’s share price at RM2.15-2.20, which is the price level traded prior to the announcement of the merger proposal.

Source: Affin Hwang Capital Research - 13 Jan 2015