Fundamental Analysis for CIMB GROUP HOLDINGS BHD

Transcription

1 Page 1 of 6 Fundamental Analysis for CIMB GROUP HOLDINGS BHD Company Name: CIMB GROUP HOLDINGS BHD Board: Main Board Stock Code (Bursa): CIMB FBMKLCI: TRUE Bloomberg: CIMB:MK Reuters: CIMB.KL Industry: Sub-Sector: FINANCIALS BANKS Company BANKING & FINANCIAL RELATED SVC; HOLD OF PROP FOR LETTING TO A RELATED Description: CO. Date of Analysis: 5-Apr-12 Price: 7.66 Financial Year: /31/2011 Stock Grade: Emerging Investment Grade Buy & Hold Returns Potential Growth Profitability 10 Profitability ROI ROI Liquidity Efficiency Sustainabili Potential G Liquidity Buy & Hold Sustainability Efficiency Strong future growth drivers: I think 2012 could surprise on the upside as most of the downside risks are already quite visible. On our part, we believe recent changes to our business model and processes have made us more competitive in our regional wholesale business and our 2012 deal pipeline is very good. Despite the anticipated slower credit growth environment for retail loans in Malaysia, we believe we can build on the huge advances we made in consumer banking as a whole last year. We expect CIMB Niaga to continue its high growth rates in line with robust Indonesian markets and CIMB Thai s transformation to pick up momentum following the commissioning of our new core banking system in March/April this year. We are overall cautiously optimistic and have set a ROE target of 16.4% for the year, said Dato Sri Nazir. Potential Risks:

2 Due-Diligence All figures in millions of Ringgit Malaysia except per share values and ratio Measures /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/ /12/31 Importane Rate Comments Profitability Increasing Sales Revenue 4,072 6,114 5,277 4,723 8,178 9,543 10,028 10,540 11,169 12,682 Increasing Operating Income (158) 1,230 2,224 1,305 3,035 3,675 2,758 3,778 4,551 5,052 Increasing Net Income After Tax ,029 1,609 2,914 2,013 3,047 3,690 4,074 Increasing Gross Profit Margin (Preferably 30%) -3.9% 20.1% 42.2% 27.6% 37.1% 38.5% 27.5% 35.8% 40.7% 39.8% Increasing Net Profit Margin (Preferably 10%) 18.4% 20.3% 20.7% 27.8% 24.5% 38.6% 27.1% 36.2% 41.6% 41.0% ROI Increasing ROE (Preferably 12%) 10.9% 15.7% 12.2% 13.4% 15.7% 22.0% 14.9% 18.6% 19.8% 19.9% Increasing ROIC (Preferably 15%) -1.20% 6.82% 9.60% 5.33% 7.51% 9.32% 5.81% 7.77% 8.14% 7.84% Increasing CROIC (Preferably 15%) 27.26% 6.39% 4.20% % 18.26% 53.82% -6.98% 5.20% -6.90% 20.69% Liquidity Increasing Net Cash from Operations 2, (7,716) 5,480 15,918 (2,109) 1,908 (2,999) 10,367 Increasing Free Cash Flow / Sales (Preferably 5%) 63.6% 13.5% 13.0% % 64.7% 162.1% -24.7% 18.0% -25.9% 78.6% Increasing Quick Ratio (Preferably 1, but 2.5) Short & declining Cash Conversion Cycle -2,492-2,931-4, ,630 Efficiency Increasing EPS Increasing ROE (Preferably 12%) 10.9% 15.7% 12.2% 13.4% 15.7% 22.0% 14.9% 18.6% 19.8% 19.9% Increasing OCF/TA (Preferably 8%) 3.0% 1.0% 0.8% -6.8% 3.4% 8.7% -1.0% 0.8% -1.1% 3.5%

3 Sustainability Declining Debt/Equity Ratio (Preferably < 1) Operating Income Variability (158) 1,230 2,224 1,305 3,035 3,675 2,758 3,778 4,551 5,052 Sales Variability 4,072 6,114 5,277 4,723 8,178 9,543 10,028 10,540 11,169 12,682 Decreasing Accrual Ratio (Preferably < -5%) Increasing Altman Z Score (Preferably 2.6) Declining Beneish Score (Preferably < -2.22) Potential Growth Increasing Sustainable Growth Rate (Preferably 8%) Increasing Expected Net Income Growth (Preferably 8%) Increasing Expected EBIT Growth (Preferably 8%) Quality of Sales Revenue Growth (Preferably 80%) % 23.2% 18.9% 687.5% % % 177.7% 50.0% 164.5% -99.2% N/A % 10.6% 5.7% 6.8% 10.8% 8.9% 8.5% 14.2% 9.3% 11.8% N/A % -67.7% 564.8% 78.0% -87.7% -14.8% 56.5% 4.0% % N/A % -38.6% 334.4% 38.0% -54.3% -8.3% 33.8% 2.4% % 2007: 57.6% 2008: 86.7% 2009: 83.0% 2010: 95.0% 2011: 93.0% : 87.6% : 91.0% Quality of Operating Income Growth (Preferably 80%) 2007: 71.1% 2008: 37.1% 2009: 55.1% 2010: 50.1% 2011: 66.7% : 80.3% : 88.0% Quality of Net Cash from Operations Growth (Preferably 80%) 2007: 40.2% 2008: 9.8% 2009: 4.3% 2010: 40.9% 2011: 5.3% : 4.0% : 4.8% Buy & Hold Returns Shareholder Wealth Creation (Preferably 8%) Full: 13.9% 10-Y: 12.9% 5-Y: 7.6% 3-Y: 26.7%

4 Investment Strategy Position Strategy Position Strategy: Lump Sum + Top Up Averaging Down Method: Dollar Cost/Value Averaging Buy Criteria Criteria 1. The current quarter's EPS is up more than 15% from the same quarter the year before. 2. Price is below Intrinsic Value 3. Current EY% or Rolling 4Q EY% > 6% 4. Current DY% or Rolling 4Q DY% > 6% 5. Stock price breaks out of consolidation/dip on an uptrend. 6. Comparison of P/B ratio (for Financial stocks only) 7. Company owner, EPF, Khazanah and PNB heavily buying Sell Criteria Criteria 1. Current EY% or Rolling 4Q EY% < 6% for more than 2 years 2. Current DY% or Rolling 4Q DY% < 6% for more than 2 years 3. Quarterly EPS drop for 5 consecutive months 4. Fundamental of business turns unattractive or bad 5. Found a better opportunity to replace this stock 6. The stock drops near to my average cost or hit my stop loss 7. Long term trend changed from bullish to bearish 8. Company owner, EPF, Khazanah and PNB heavily selling. 9. Did I make a mistake? 10. Has the stock risen too far from its intrinsic value? I VI Remarks Remarks

5 Discounted Cash Flows Valuation 13 Shares Out. M. O. S. Sustainable Growth (for reference) Growth % (for DCF Calc.) Average risk premium Average Risk free rate 11 Discount % Terminal % 2011 FCF Excess Cash Intangibles Assets Intangibles% add to DCF Decay Rate (Yr4E-Yr7E) Extra Decay (Yr8E-Yr10E) Default Value % 9% 8% 5.50% 5.00% 10.5% 2% % 8% 15% Custom Value 15% 20% Projection of Future Free Cash Flow Yearly Growth Future Value 10, , , , , , , , , , Discounted 112, , , Perpetuity Value Present Value 201, , , Y 5-Y 10-Y Shares Outstanding Fair Value Desired M.O.S. 20% Buy Under Current Price Actual M.O.S. 72% 73% 74%

6 Market Timing Analysis Discounted Cash Flow Valuation 3-Y 5-Y 10-Y Fair Value Actual M.O.S. 72% 73% 74% Buy Under Selection 3-Y: Fast-growing company; operates in highly competitive, low margin industry 5-Y: Solid company; operates with advantage such as strong marketing channels, recognizable brand name, or regulatory advantage 10-Y: Outstanding growth company; operates with very high barriers to entry, dominant market position or prospects Price-to-book Ratio Valuation by Price-to-book Ratio: Current EY% or Rolling 4Q EY% > 6% CU EY%: 6.64 R-4Q EY%: 7.61 Current DY% or Rolling 4Q DY% > 6% CU DY%: 3.66 R-4Q DY%: 3.09 Current Cash Return% or MRQ Cash Return% > 6% 61 CU CR%: 28% MRQ CR%: 33% Quarterly Financial Performance Increasing revenue Increasing net profit Increasing EPS Sep-10 Dec-10 Mar-11 Jun-11 Dec-11 3,023 2,750 2,959 3,031 3, ,012 1, Dec-11's EPS 15% from Sep-10 29%