CIMB has finally announced that its 99.99% subsidiary, CIMB Bank has entered into a sales and purchase agreement to acquire a much anticipated  59.98% stake in Bank of Commerce (BOC) in Philippines from the San Miguel Corporation for a total cash consideration of PHP12.2bn or RM881m which values the stake at 1.14x Dec 2011 P/BV. Overall we are positive on the acquisition of BOC as we view  this as  a perfect opportunity to enter a large and underpenetrated banking market at a reasonable 1.14x P/BV and relatively undemanding absolute pricing of RM881m, essentially implying a favourable longer-term risk-reward profile. Maintain BUY at an unchanged FV of RM8.53 (2.3x P/BV, 16.7% ROE). 

Regains some lost ground. The FBM KLCI put on 5.73 pts to close at 1590.60 on the back of gains chalked up by Petronas Dagangan, Petronas Gas, Genting, YTL and CIMB. Gainers edged out losers by 404 to 307. However, with the weaker overnight performance of the Dow, more so with key European indices falling by 1.8%'2.8%, local stocks should feel the heat today. Today's news headlines include: CIMB Group Holdings enters into an agreement to acquire a 60% equity stake in Bank of Commerce in the Philippines for PHP12,203m, Kencana Petroleum receives a Letter of Award from Murphy Sarawak Oil for the fabrication of offshore topsides for RM460m-RM474m, Perisai Petroleum awards a USD208m contract for the construction of a jack-up drilling rig and Sarawak Oil Palms announces RM43.0m net profit for 1QFY12.

Najib declares windfall for palm oil planters as general election looms PM Datuk Seri Mohd Najib Razak announced windfall one-off payments to palm oil planters and their family yesterday, the latest in a string of giveaways ahead of an upcoming general election. The Federal Land Development Authority will distribute RM1.7bn to more than 112k members of its planters' cooperative, as well as their wives and children. The government has already raised civil servants' salaries, announced plans for a national minimum wage, and begun distributing RM500 cash handouts to the poor. (Malaysian Reserve)

CIMB Group Holdings will pay RM881m or RM13.13/share for a 59.98% stake in Bank of Commerce (BoC) in the Philippines and thus extends its footprint further into the Asean banking sector. Its group CEO Datuk Seri Nazir Razak said the purchase value of 1.14x price to book and at a premium of about RM110m was reasonable but warned that the multiple could rise to 1.3x upon alignment with CIMB's accounting and provisional policies. (Malaysian Reserve) Please see accompanying report

Kencana Petroleum's wholly-owned subsidiary, Kencana HL SB, has received a letter of award from Murphy Sarawak Oil Co Ltd for the fabrication of offshore topsides. The job is estimated at between RM460m and RM474m. It was given the award on 20 Apr and is expected to deliver the job from 1QFY13 to 2QFY13. (Malaysian Reserve) Please see accompanying report

Perisai Petroleum Teknologi has announced its entry into the offshore drilling segment by ordering a USD208m (RM635m) rig from SembCorp Marine Ltd subsidiary, PPL Shipyard, to construct a jack-up rig, with an option for a second rig at a later date. The first Pacific Class 400 jack-up drilling rig is expected to be completed and delivered by end-July 2014, while the second unit of similar specification is set for delivery in 2Q15.  (Financial Daily)

MMC Corp is expected to relist its 51% owned unit Malakoff Corp next year, a move which could involve an offer for sale by MMC of its shares in Malakoff, besides a new share sale in the power generation subsidiary. Group MD Datuk Hasni Harun said the planned relisting could see MMC offering to sell at least a quarter of its 51% block in Malakoff. This could mean MMC lowering its interest to 38.25%, thus reducing Malakoff to an associate company. (Financial Daily)

Indonesia: Worst rupiah start since 2005 pressures Indonesia to undo easing Indonesia's central bank will probably consider steps to curb excess funds in the economy and extend a pause in interest-rate cuts as the second-worst performing currency in  Asia highlights the threat from inflation. Bank Indonesia will keep the reference rate at 5.75% tomorrow, according to all 21 economists surveyed by Bloomberg News. The central bank has left its benchmark unchanged since an unexpected reduction in February. (Bloomberg)

Australia's trade deficit widened in March to the biggest in almost 2 1/2 years as a 5% rise in imports outpaced export growth in an economy driven by the mining industry. Imports  outpaced exports by AUD1.587bn (USD1.6bn), from a revised AUD754m deficit in February, the Bureau of Statistics said. The gap was the widest since a AUD1.595bn shortfall in October 2009 and exceeded the AUD1.3bn median estimate in a Bloomberg News survey of 20 economists. (Bloomberg)

German industrial output rose more than three times as much as economists forecast in March, adding to signs Europe's largest economy may have avoided  recession. Production jumped 2.8% from February, when it dropped 0.3%, the Economy Ministry said. February output was revised up from a 1.3% decline. Economists forecast a March gain of 0.8%, the median of 38 estimates in a Bloomberg News survey shows. In  the year, production advanced 1.6% when adjusted for working days. (Bloomberg)

Manufacturers in the US became less-optimistic about 2012 sales growth than at the end of last year,  while service companies grew more upbeat, according to a survey by the Institute for Supply Management. Purchasing managers at US factories said they anticipate sales will grow 4.5% this year, less than a 5.5% December prediction, according to the Tempe, Arizona-based group's semi-annual forecast issued. By contrast, service providers estimated revenue will climb 4.8% this year, up from the 3.1% forecast in December. (Bloomberg)

Employers in the US were seeking to fill more jobs in March than at any time in almost four years, showing growing confidence in the US economy. The number of open positions increased by 172,000 to 3.74m, the most since July 2008, from a revised 3.57m the  prior month that was larger than previously estimated, the Labor Department said. (Bloomberg)

Source: OSK188