Well actually if profits for the following quarters deteriorate and Maybank has to reduce dividends, the dividend yield will be corrected to around 4% again.

Yup especially when monthly inflation rates are at all time low. BNM will likely introduce rate cut

I don't understand how e-wallet will replace banks.
Banks give credit and that's something e-wallet can never do.
Banks can also venture into e-wallet. CIMB owns part of TnG and TnG has it's e-wallet.

Banks might close some physical branches. This might improve profitability through reduced expenses. But banks will never close all branches because some customers need to be physically there to sign documents or prefer traditional banking. There are some customers today who don't trust online banking.

Discounts at shops, pay without cash or card (just scan QR code), cash back, convenience etc

Buy when people takut, sell when people greedy

You can never go wrong with Maybank or CIMB. I deal with many people age 18-23 and have to bank in money for them.

Based on statistics I will say that:
55% use Maybank
35% use CIMB
10% use others like Public bank, Hong Leong and Bank Islam

I hope it falls below RM8.75 so can buy more

RM8.88 very ong to buy hehe

Maybank has 11,241 mil shares. Maybank has a total exposure of RM1.95bil to Hyflux.

Suppose the whole investment is 100% impaired, the share price should only fall by (1,950mil/11,241mil) RM0.17347. Before Hyflux news it was trading at RM9.20, minus RM0.32 dividend and RM0.17347 impairment, it should be RM8.70.

Now suppose Maybank keeps the dividend at RM0.25, it should be safe to buy below RM8.95 before the next QR and dividend.

But if US announce rate cut, likely it will fall a bit more.

This post has been edited by Yggdrasil: Jul 21 2019, 02:35 AM

If you can do a better calculation please show us especially the methodology you quantify the fall in Goodwill due to bad name, potential recovery of bad debt, probability of US rate cut, probability of recession etc.

This is just a simple calculation that worked for IJM the day it's contract for LRT3 was terminated. It was oversold beyond the contract value. Look at the price today.

Currently do not hold any but plan to hold 22.5% of it in my portfolio. I'm currently holding CIMB. Most likely holding a total of 45% finance stocks (Maybank & CIMB) in the ratio of 9:7.

I'll enter next month in batches. If banking stocks announce a fall in profitability before Maybank's QR is out, most likely Maybank will also suffer fall in profitability. I'll wait 20 days for the earnings drift to end before entering. If a few banks report good results, I'll enter immediately before the QR is released.

Right now I'm at 65% cash 35% equities.

US already announced a potential rate cut this month although it will be very small. Malaysia will likely follow if that happens.

Lai lai support at RM8.80

I say I waiting at RM8.80 but actually queuing at RM8.50



Better wait for Department of Statistics Malaysia's inflation rate for June 2019 first. It should be out by end of this month. If it's deflation then most likely BNM will follow US and cut rates. This will cause banking stocks to drop further.

This post has been edited by Yggdrasil: Jul 23 2019, 08:31 PM

Ok. Who's going all in?

So anyone bought Maybank? I am buying other shares instead. CIMB is actually quite tempting to buy compared to this.

Based on my calculation, CIMB should give at least 8% return p.a. (total of capital gains and dividend) for the next 5 years.

Oopsie it breached RM8.80

Well, in their 2018 Annual Report, CIMB has a plan called "Forward 2023". They aim to achieve several objectives such as an ROE of 12-13% (Current 2019 target: 9-9.5%).

In their previous plan T18 or "Target 2018", they have already achieved the following from 2014 to 2018:

Cost to income: 59.1% to 49.8% (Lower the better)
CET1: 10.1% to 12.6% (Higher the better)
ROE: 9.3% to 11.4% (Higher the better)

CIMB is also investing heavily into technology. FYI, they are owners of Touch & Go. Their e-wallet will likely gain dominance in Malaysia because of their huge customer base and their partnership with AliPay. Recently, CIMB formed CGS-CIMB in Malaysia, a stockbroking company, with a Chinese company after acquiring all of their shares.

While the past is not a predictor of the future, I think it is very good results. But to keep in mind that companies will try to manipulate results just to please shareholders.

CIMB's ROE is decent. Not as high as JP Morgan's 14% but still great. CIMB has achieved what they promised so far (See above). One reason why Maybank's share price is falling because investors are worried about Maybank's credit risk. Most of the defaults and potential defaults are from Maybank. See Hyflux Singapore case and one more Malaysian company (forgotten the name) is issuing Sukuk again because it breached the agreement and requires to repay the banks (where Maybank is one of the lenders).

CIMB also has Islamic banking while it may not be as great as Maybank's. CIMB also suffers from DRIPs problem. Correct me if I am wrong but I believe CIMB is worse than Maybank because CIMB allows DRIPs almost every dividend but Maybank only once out of the 2 dividends.

CIMB and Maybank don't give super high returns. I think probably an average of 8-14% p.a. (including dividends).
It is not a high growth company because there is not much room to grow. Everyone is already in debts and cannot get anymore loans without the risk of defaulting.

With that being said, banks today are more robust than the previous financial crisis.

Now the reason why CIMB is a reasonable buy at RM5.17 (as of 25/7/2019 10:55am). Is because it is trading below it's book value (Maybank is trading above). And I base my at least 8% return p.a. hypothesis based on the details of Khazanah's convertible bonds.

If you didn't know, Khazanah is the major shareholder of CIMB. Recently they needed money so they issued a zero coupon convertible bond. Extract from article from TheEdge:

"According to Bloomberg, the debt papers are convertible to CIMB shares that are currently held by Khazanah at the conversion price of RM6.14 or US$1.489 (for US$500 million). The five-year bonds mature on Aug 8, 2024 with zero coupon rate."

We know that a zero coupon bond is issued at a discount from its face value. But, to lower this discount, we need to lower the risk. Hence, Khazanah pledged CIMB's shares and gave the bond holders the option to convert at RM6.14


"“The shares were transferred pursuant to securities lending agreements that Khazanah had entered into with CGS-CIMB Securities Sdn Bhd, Credit Suisse Securities (Europe) Ltd and JP Morgan Securities plc respectively, in relation to exchangeable bonds issued recently,” read the statement."

CGS-CIMB is owned by CIMB. Any profit from the underwriting will go back to CIMB. Credit Suisse Securities (Europe) Ltd and JP Morgan Securities plc are big reputable investment banks. In fact, Warren Buffett likes JP Morgan so much that he keeps on buying it. Anyway, the main point is that these banks believe the fair value of CIMB in 5 years is at least RM6.14. They did the underwriting and know the inside and outside of CIMB better than us (public people).

Then, I make my own simple calculation based on the information of current share price, current dividend rate, future share price, and number of years (5).



Based on the calculation above, for 8% return:
Buy below RM5.25 per share
Buy below RM5.37 per share (if utilise DRIPs - i.e. 10% discount on average market price of shares)

Since you do not have my Excel file I will calculate for you:

Based on the calculation above, for 9% return:
Buy below RM5.04 per share
Buy below RM5.16 per share (if utilise DRIPs - i.e. 10% discount on average market price of shares)

Based on the calculation above, for 10% return:
Buy below RM4.48 per share
Buy below RM4.96 per share (if utilise DRIPs - i.e. 10% discount on average market price of shares)

Based on the calculation above, for 11% return:
Buy below RM4.65 per share
Buy below RM4.76 per share (if utilise DRIPs - i.e. 10% discount on average market price of shares)

Based on the calculation above, for 12% return:
Buy below RM4.47 per share
Buy below RM4.58 per share (if utilise DRIPs - i.e. 10% discount on average market price of shares)

Buying CIMB below the 12% return price should give you a return of >12% p.a. for the next 5 years.

Assumption:
1) CIMB share price in 5 years (at least RM6.14). If share price is higher than RM6.14, you will get higher return. But now, it will guarantee a minimum 8% return p.a. average.

2) Dividends will only increase a bit RM0.25 (2019) per year to RM0.26 (2024). This is a prudent calculation and I believe that the dividends will actually be higher by 2024. If dividend is higher than this calculation, you will get higher return.

3) CIMB will offer DRIPs every dividend until 2024. To be safer, ignore the DRIP.

4) If you follow the DRIP calculation, you must use DRIP every time when possible and do not sell the shares until the end. This will increase your dividend growth and allow you to buy even more shares.

Disclaimer: I currently hold 3,100 units of CIMB but do not wish to buy further because of better alternative investments and diversification.

Happy investing!

This post has been edited by Yggdrasil: Jul 25 2019, 06:35 PM

This is an extract from CIMB's Audited Annual Report 2015.

Compare that to CIMB's Audited Annual Report 2018.



They achieved everything except the ROE they promised. They must have revised their targets between 2016-2017 (lazy to look).



For example, they revised their 2019 targets in 2018 Annual Report (report was published in 21 Mar 2019) because of the change in economic condition.

So CIMB is not exactly misleading as they revised their targets from time to time.

Yes, you are right on this. Based on their annual reports 2018:

Maybank 2.41%
CIMB 2.91%

However, the recent cases in 2019 involve Maybank.

1) Maybank slips on exposure to Hyflux

2) "The initial legal action by sukuk holders had caused RAM Ratings to downgrade Bright Focus’ sukuk six notches down from A1 to BB1 on June 3. Sources said the sukuk holders include Lembaga Tabung Haji, Malayan Banking Bhd , Standard Chartered, Nomura Asset Management, Amundi, Retirement Fund Inc, KAF and RHB."

Extract from: Legal suit pending sukuk revamp

Investors already react before the financial statements are out. Just like when Trump announced the Huawei ban, Inari's shares already tumbled before the bad quarterly earnings came out.

This post has been edited by Yggdrasil: Jul 25 2019, 04:53 PM

Just bought Takaful today but lost money I think it's because they didn't give dividend (not sure why).

RIP Banking stocks tomorrow morning.
Trump forcing more rate cut.