If they sold Maybank, how else are they going to pay their ASB dividends?

Hi Yggdrasil,

I also looked at CIMB as it seems cheap on paper.

My take is I can't find what's compelling about CIMB though - it seems to me they over-expanded with very little to show for it... a bit all over the place. To borrow from Taleb, Banking is a Extremistan industry, where the big grow bigger. There's very little point being No. 8 in Thailand, for example.

CIMB's ROE is also very low, and has high bad loan formation... My short take is CIMB lacks discipline. They've promised a lot, but the delivery is really lethargic.

I like Maybank for its Islamic segment, mostly. Etiqa could be a nice wildcard bonus. What I don't like is the continuous share dilution with its DRP.

Other than Maybank, I have BIMB on my radar as well - again, Islamic is growing very strongly and has high efficiency and low bad loan formation - perhaps the threat of hellfire is very effective.

Yggdrasil, thank you for the detailed analysis shared with us.

With respect, I'd like to point out some issues that stood out for me:

Please do again correct / debate me if my analysis is wrong - I'm here to learn.

It seems that Target2018 goals have all been rolled back based on last 4Q and 2019's KPIs - that feels like janji dicapati to me. In other words, that's some quick fix steroids given by top management to get their T18 bonuses.

If I'm not mistaken, FY18 had some one-offs which burnished the results.

I used CIMB's 1Q19 stats here from Affin Hwang: ROE 9.2%, CIR 55%, GIL 3%

Quite a long way from what 2018 'delivered'. In other words, what was 'achieved' by management was a quick fix and not meant to be long term.

Interestingly, while MBB gets the headlines as it is a major corporate lender, CIMB's Impaired Loans Ratio is significantly (50bp) higher than MBB's (circa 2.5%).

You are spot on on the high household debt and potential property bubble situation - that's a potential black swan there that the local banks will have to look out for. Imho, banks will have to piggyback on general economic growth - I'll be very happy with 5-6% returns a year.

Same, I'll wait for next Q. See what the divvy going forward looks like too before committing.

We're still in a sweet spot economy wise - good growth, benign inflation. ECRL resumption should give the economy a near term jolt over the next few years.

It may also be decided to let MYR strengthen a little too by holding rates, something to show for MoF's 'astute management and fiscal prudence', reduce potential trade frictions and make high-tech capital goods import cheaper.

The strongest (dubious) argument for rate cut is maybe to help more people own their own homes.

Just for fun, my prediction is Maybank's next Q is -5% EPS - last year was a very good year so relatively, results will be 'bad'. I'm assuming 55 sen divvy this year.

SG is going to be a problem this Q - MSL actually posted a quarterly loss last Q driven by Hyflux.

MSL is largely a corporate lender, and SG is going into recession... On the bright side, looks like no more S$3 to RM1.

MBB is the only secured creditor to Hyflux, and has appointed managers / receivers to the Tuaspring Power Plant - how much do u guys think a powerplant in SG is worth now?

MBB's remaining exposure to Hyflux (non-impaired) is around S$400m i believe?

Anyway, Hy-fak is small case compared to Sapura Energy lah... they are running out of cash again it seems. Can't wait to see what trick Shahril pulls out of his sleeves this time.

S$400m less 1 PowerPlant and all the staplers, scotch tape, gel pens...

I'd worry more about Sapura Energy and other O&G accounts tbh. Especially Sapura.

maybe trend towards RM8 ex-div wor....

there's very determined (foreign) selling... 1m units thrown at one go at 52w low.

I do the 5% thing. I also buy in batches - kinda like centering; I bought some at RM 8.66, and may get another batch at RM8.20 ex-div etc.

If it goes up, I've gained money. If it goes down, I get to average.

I also check the yields - 6.3% is pretty much a no brainer for me, although I expect this year's divvy to be in the 53-55 sen range.

2 more things to watch out for - Malaysia's weight on the WGB Index, and another possible 25 bp cut by BNM in Nov.

I'd call KLCI bottom at 1,600 though. I start buying index stocks at this level, though I still do maintain my late economic cycle 50% cash ratio. We didn't go on the global rally, so not much height to fall from either.

If KLCI breaks 1,600, it's going to be ugly. No eye see ugly.

Agree. Very few sectors are globally competitive - now we are 2 core engines down - CPO and O&G kaput...

Why do we even invest in Malaysia then? Sometimes I do ask myself that.

I use Malaysia as EM exposure, hopefully will catch more growth here. For EM standards, MY is ok lah. Not awesome, but not bad either - there are certain standards that are very close to Advanced economies already.

I work in startups and Malaysian startups are very dynamic - there's hope for the future yet. We need to be able to fund them to retain them in Malaysia.

I don't think we'll crash yet though - Donald Dump still needs to get re-elected

On another note, still awake ah? Yggdrasil you run your own company is it?