KUALA LUMPUR (Jan 14): The rebound in CIMB Group Holdings Bhd's (fundamental score: 1.35; valuation score: 2.1) share price yesterday reflected the market's opinion on the scrapping of the country's second-largest lender's proposed merger with RHB Capital Bhd (RHBCap) and Malaysia Building Society Bhd (MBSB), said Khazanah Nasional Bhd managing director Tan Sri Azman Mokhtar.
"The market has spoken on how it feels about the (failed) merger. There was some profit-taking activities today (in CIMB), but overall, the counter has rebounded," he told reporters after summarising the 11th Khazanah's Annual Review.
FBM KLCI component stock CIMB closed 17 sen lower today at RM5.75, with 25.01 million shares traded.
When The Edge Financial Daily reported yesterday that the three-way merger between CIMB, RHBCap (fundamental: 1.5; valuation: 2.1) and MBSB (fundamental: 1.2; valuation: 1.6) had been called off, CIMB shares shot up by 74 sen or 14.29%. It was yesterday's top gainer and one of the most active stocks across the bourse.
Today, all three lenders confirmed the daily's report, citing unfavourable current market conditions. The FBM KLCI has been a laggard among the region, while crude oil prices have sent ringgit tumbling to more than five-year low and triggered concerns of a wider budget shortfall.
CIMB shares have fallen since the merger proposal was first announced last July.
In fact, throughout 2014, Khazanah's 29.19%-holding in CIMB recorded RM4.5 billion in losses, as revealed at the Khazanah Annual Review today. However, CIMB's 10-year contribution to the strategic investment fund's portfolio stood at a positive RM7.1 billion.
Had the merger occurred, Khazanah's stake in the enlarged entity will be diluted to 20.5%.
Although Azman did not share his views on the proposed merger, he said any merger-and-acquisition carried out by CIMB – or other companies owned by Khazanah – has to be anchored on discipline.
"(CIMB) is good and fundamentally strong. It has demonstrated the ability not just to acquire but to integrate. There'll be other opportunities and there's a lot to do where it is (without the merger)," he said, after the cancellation of the mega merger was made official.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)