Friday, September 30, 2011

CIMB Research downgrades RHB Cap to Neutral

KUALA LUMPUR: CIMB Equities Research has downgraded RHB Capital to Neutral following surprising news about RHB Cap's potential merger talks with OSK HOLDINGS BHD [].

It said on Friday, Sept 30 that the proposal for RHB Cap was short-term negative but long-term positive.

'News on RHB Cap's potential merger talks with OSK surprised us as management had not shown any interest in acquiring an investment bank. We estimate that it could lead to 9-11% EPS dilution due to a likely high price and potential rights issue,' it said.

CIMB Research said still, it would be positive in the longer term as it would give RHB Cap a regional presence and boost its domestic retail broking business.

'We retain our earnings forecasts. Though we roll our target price forward to 2012, it drops from RM10.70 to RM8.95 because we now value it on parity with its DDM value, instead of 10% premium, and scale back our dividend growth rate assumption by 2% pts to 15.1% because of weakening investment banking deal flow,' it said.

The research house said in line with its sector downgrade, it downgraded RHB Cap from Outperform to Neutal and preferred Maybank.

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