KUALA LUMPUR: CIMB Group Holdings Bhd will remain in the stockbroking industry despite selling all of its shares in the CGS-CIMB partnerships, in accordance with the call option exercised by CGS International Holdings Ltd (CGI).
The remaining 25 per cent of CGS-CIMB Securities International Pte Ltd and 25.01 per cent of CGS-CIMB Holdings were sold to CGI as of December 29, 2023, as the last step in the call option that the latter had exercised to gain complete control over the regional stockbroking business, which was initially a 50:50 joint venture.
CIMB will receive an estimated RM780 million in gross proceeds from this sale, bringing the total proceeds for the sale of its 100 per cent original stockbroking business (since 2018) to about RM2.5 billion.
CGI is a subsidiary of China Galaxy Securities Co Ltd, which ranked as the fourth-largest securities firm in China based on revenue during the first half of 2023.
To stay in the stockbroking industry, CIMB is paying RM147.94 million to acquire 100 per cent of KAF Equities Sdn Bhd.
It was disclosed in CIMB Investment Bank's first quarter of 2023 (1QFY23) financial statement that a sale and purchase agreement was signed with KAF-Seagroatt & Campbell on April 7, 2023.
The proposed acquisition obtained Bank Negara Malaysia's approval on August 2, with approval from the Securities Commission still pending, according to Public Investment Bank (PublicInvest).
The investment bank remained confident in CIMB's ability to rebuild its stockbroking franchise.
"We are still optimistic over its medium- to long-term banking-related prospects as it continues to reap the rewards from its past and ongoing transformative initiatives," it said.
PublicInvest reaffirms its outperform call on CIMB with an unchanged dividend-derived target price of RM6.70.
It said that while KAF Equities is reported to have registered losses of RM6 million and RM1.3 million in its recent two financial years (2023 and 2022 respectively), the financial impact is inconsequential once eventually consolidated into the CIMB Group.
"We remain positive over this transaction, however, and see the group reaping synergistic benefits over the medium to long term from the combination of the two franchises and the eventual rebuilding of its stockbroking business," it said.
