CIMB’s 2QFY13  results  were  within  our  and  consensus  expectations. The  stock  faces  headwinds  from  Indonesia’s  challenging  macro conditions  and  soft  capital  market,  among  others.  However,  we  think these have largely been priced in  and any further sharp selldown is an opportunity  to  accumulate.  We  maintain  our  MYR9.75  FV  (based  on  a CY14 P/E of 14x) and BUY call.

- 2QFY13 results in line. CIMB’s 2QFY13 net profit of MYR1.05bn (-5% y-o-y;  -24%  q-o-q)  brought  1HFY13  reported  net  profit  to  MYR2.44bn (+15% y-o-y), accounting for 52% of our and 51% of consensus full-year net  profit  estimates.  We  consider  the  results  to  be  in  line  with expectations as 1QFY13 net profit was lifted by the MYR515m gain from the sale of CIMB Aviva, which was partly offset by restructuring charges of MYR200m. These items have been incorporated in our forecasts.

- Result highlights. Positive takeaways were: 1) loan growth was resilient with annualised growth of 13.8% trending ahead of our 11% assumption; 2) net interest margin (NIM) was stable q-o-q, helped by a higher loan-to-deposit  ratio  (LDR)  of  83.8% (1Q13:  78.7%);  3)  q-o-q  rise  in  underlying overheads was contained (+1% q-o-q), but the cost-to-income ratio (CIR) stayed  high  at  59%;  and  4)  asset  quality  improved  further.  Thus,  2Q13 credit  cost  stayed  low  at  15bps.  The  main  negative  was  the  weaker underlying  non-interest  income  (-6%  q-o-q)  due  to  lower  gains  from derivatives. 

- Dividend. CIMB declared an interim net DPS of 12.8 sen (2Q12: 5 sen, net),  which  translates  into  a  net  payout  ratio  of  40%.  The  entire  portion can  be  elected  to  be  reinvested  in  new  CIMB  shares. We project  a  net DPS of 24.5 sen for FY13, based on a net payout assumption of 40%.

- Forecasts. No changes to our earnings forecasts.

- Investment  case.  We  retain  our  fair  value  of  MYR9.75  (based  on  a target  CY14  P/E  of  14x)  and  BUY  call.  Admittedly,  the  stock  faces headwinds  from  Indonesia’s  challenging  macro  conditions  and  soft capital  market,  among  others.  Valuations,  however,  are  still  decent  and we think any sharp selldown is an opportunity to buy.

Source: RHB