KUALA LUMPUR (Feb 16): CIMB Group Holdings Bhd (KL:CIMB) could net an RM810 million one-off gain from a stake reduction in PT Bank CIMB Niaga TBK to comply with a potential increase in Indonesia’s minimum free float requirement to 15%, according to Hong Leong Investment Bank (HLIB).
The potential divestment of a 7.4% interest in the subsidiary would not only ensure regulatory compliance, but also bolster the Malaysian banking group's capital base.
HLIB added that the resulting proceeds could provide the group with greater financial flexibility to support loan growth or reward shareholders with special dividends.
“Post-divestment, we anticipate the circa RM810 million proceeds will be deployed to enhance shareholder returns. Our scenario analysis suggests the group may leverage these proceeds for loan book expansion.
“Alternatively, we do not rule out a special dividend distribution, if the stake reduction happens. This would be in addition to the RM2 billion capital return plan by 2027, potentially lifting FY26-27 dividend payout ratio and yield to circa 70% and 6.5%, respectively,” said the research house in a note on Monday.
The possible move comes amid MSCI’s recent concerns over the investability and transparency of the Indonesia Stock Exchange (IDX). Indonesian regulators are reportedly working on new frameworks, including a proposal to raise the minimum free float requirement across the bourse from 7.5% to 15%. A final decision is expected by May ahead of MSCI’s reassessment.
CIMB currently holds a 92.4% stake in CIMB Niaga, which contributes roughly 25% of the group’s profit before tax (PBT).
While regulatory developments and volatility in the Indonesian rupiah have raised concerns, HLIB expects earnings impact to be limited. It estimates a marginal PBT reduction of 1.2% and 2.0% for FY2026 and FY2027, respectively, assuming completion of the 7.4% stake sale.
HLIB maintained its “buy” call on CIMB with an unchanged target price of RM9.50, citing the stock’s projected dividend yield of over 6% and the ongoing RM2 billion capital management programme through 2027.
Bloomberg data show the stock has 17 “buy” calls and three “hold” calls, with no “sell” recommendation, implying an upside potential of 6.7%.
The stock trades at a trailing price-earnings (P/E) ratio of 12 times, with a dividend yield of 5.4%. This compares with its banking peers — Malayan Banking Bhd (KL:MAYBANK), which trades at 14.3 times with a 5.1% yield, and Public Bank Bhd (KL:PBBANK) at 14 times with a 4.2% yield, according to AskEdge data.
Shares of CIMB fell five sen or 0.59% to RM8.41 at the time of writing on Monday, giving it a market capitalisation of RM90.68 billion.