KUALA LUMPUR (June 7): Hong Leong IB Research has maintained its “Hold” rating on CIMB Group Holdings Bhd with a higher target price of RM6.30 (from RM5.93) after CIMB signed a share purchase agreement to formalise its strategic partnership with CGI.

In a note today, the research house said it was positive on the latest development, as the divestment will enable CIMB to achieve further saving in its overhead expenses (up to circa RM350 million from FY18 onwards).

HLIB Research projects modest earnings contribution from the partnership of RM10 million-RM15 million from FY18 onwards.

“Purchase consideration of RM515 million for the 50% stockbroking stake will boost its CET1 by 30 basis points to 11.8%.

“Post-acquisition, CIMB will focus its efforts in investment banking, capital market products and services.

“FY17-FY19 earnings forecasts are raised by 2.3%, 3.1% and 2.9% respectively

“We maintain our Hold call but raise our target price to RM6.30 (from RM5.93). TP is derived from GGM model based on i) WACC of 9.2% ii) ROE of 9.7% (from 9.4%),” it said.