Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<div>CTOS Digital (CTOS) raised around US$291m via its Malaysian IPO. It is majority owned by Creador, a PE firm. </div><div>We covered most aspects of the deal in our earlier notes, <a href="https://www.smartkarma.com/insights/ctos-digital-pre-ipo-credit-where-credit-s-due" target="_blank" rel="noopener">CTOS Digital Pre-IPO - Credit where credit’s due </a>and <a href="https://www.smartkarma.com/insights/ctos-digital-ipo-market-leader-strong-pe-record-and-cornerstone" target="_blank" rel="noopener">CTOS Digital IPO - Market Leader, Strong PE Record and Cornerstone</a>.</div><div>In this note, we will talk about the updates since then and the trading dynamics.</div>

CTOS Digital (CTOS) raised around US$291m via its Malaysian IPO. It is majority owned by Creador, a PE firm. We covered most aspects of the deal in our earlier notes, CTOS Digital Pre-IPO - Credit where credit’s due and CTOS Digital IPO - Market Leader, Strong PE Record and Cornerstone.In this note, we will talk about the updates since then and the trading dynamics.

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Improving NIMs and Credit:CIMB Group (CIMB.MK) [CIMB] reported 1Q21 results of MYR 2.5 bn, increasing MYR 2.2 bn (10.6x) linked quarter. Excluding the one time gain of MYR 1.2 bn, CIMB’s core operatimg result came in at MYR 1.3 bn – increasing MYR 1.1 bn or 5.1x over the same period. 1Q21 results were driven by several factors: 1) net interest income improvement of MYR 169 mn (4.9%) which was driven by NIM ex-ansion of 15 bp and modest loan growth of MYR 718 mn or 0.2%; and 2) a MYR 1.5 bn (66.5%) decline in loss provisions tracking credit quality improvement in both Malaysia and Singapore; and 
*Credit Risk Decelerating: With NCOs of MYR 1.9 bn or at 1.60% annualized of total loans (decelerating from the MYR 1.9 bn posted in 4Q20), we find that net new NPLs increased only MYR 756 mn or 23.0% on an annualized basis – quite the decline from the MYR 2.6 bn or a whopping 83.5% on an annualized basis posted in 4Q20. We believe that reserves are too light by MYR 2.6 bn– which is nearly two quarters of core operating results.

*Improving NIMs and Credit:CIMB Group (CIMB.MK) [CIMB] reported 1Q21 results of MYR 2.5 bn, increasing MYR 2.2 bn (10.6x) linked quarter. Excluding the one time gain of MYR 1.2 bn, CIMB’s core operatimg result came in at MYR 1.3 bn – increasing MYR 1.1 bn or 5.1x over the same period. 1Q21 results were driven by several factors: 1) net interest income improvement of MYR 169 mn (4.9%) which was driven by NIM ex-ansion of 15 bp and modest loan growth of MYR 718 mn or 0.2%; and 2) a MYR 1.5 bn (66.5%) decline in loss provisions tracking credit quality improvement in both Malaysia and Singapore; and 
*Credit Risk Decelerating: With NCOs of MYR 1.9 bn or at 1.60% annualized of total loans (decelerating from the MYR 1.9 bn posted in 4Q20), we find that net new NPLs increased only MYR 756 mn or 23.0% on an annualized basis – quite the decline from the MYR 2.6 bn or a whopping 83.5% on an annualized basis posted in 4Q20. We believe that reserves are too light by MYR 2.6 bn– which is nearly two quarters of core operating results. 

*Lower Tax Rate Offset By Massive Provisions: CIMB Group (CIMB.MK) [CIMB] reported 4Q20 results of MYR 195.8 mn, increasing MYR 16.7 mn (9.3%) linked quarter. During the period, we noted a  massive reduction in its tax rate from 60.6% in 3Q20 to 18.0% which was additive to bottom-line performance by MYR 70.8 mn. However, this was offset by an enormous increase in loss provisions reflecting a breakdown in credit quality; and   *Credit Risk Now Accelerating: With NCOs of MYR 1.9 bn (accelerating from the MYR 1.2 bn posted in 3Q20), we find that net new NPLs increased MYR 2.6 bn or a whopping 83.5% on an annualized basis. We continue to believe that reserve cover is too light by MYR 12.0 bn (versus MYR 1.5 bn in 3Q20) – which nearly six years of profit before tax or 21.1% of 4Q20 capital.

*Lower Tax Rate Offset By Massive Provisions: CIMB Group (CIMB.MK) [CIMB] reported 4Q20 results of MYR 195.8 mn, increasing MYR 16.7 mn (9.3%) linked quarter. During the period, we noted a  massive reduction in its tax rate from 60.6% in 3Q20 to 18.0% which was additive to bottom-line performance by MYR 70.8 mn. However, this was offset by an enormous increase in loss provisions reflecting a breakdown in credit quality; and   *Credit Risk Now Accelerating: With NCOs of MYR 1.9 bn (accelerating from the MYR 1.2 bn posted in 3Q20), we find that net new NPLs increased MYR 2.6 bn or a whopping 83.5% on an annualized basis. We continue to believe that reserve cover is too light by MYR 12.0 bn (versus MYR 1.5 bn in 3Q20) – which nearly six years of profit before tax or 21.1% of 4Q20 capital. 

CIMB Group – Heading Deeper Into the Woods

*Solid Core Operating Result: CIMB Group (CIMB.MK) [CIMB] reported 3Q20 results of MYR 194 mn, declining MYR 83 mn (30.0%) linked quarter. However, when we exclude securities gains/losses, core operating results actually came in at MYR 293 mn  - exceeding 2Q20 operating losses of MYR 58 mn; and *Credit Risk Decelerating: CIMB’s NPLs declined MYR 999.9 mn (7.5%) to MYR 12.9 bn, and represent 3.38% of total loans – improving 24 bp linked quarter. With NCOs of MYR 1.2 bn, we find that net new NPLs increased MYR 187.5 mn or 5.6% on an annualized basis. Despite the improvement, we believe that reserve cover is too light by MYR 1.5 bn – which represents just over three quarters of profit before tax.

*Solid Core Operating Result: CIMB Group (CIMB.MK) [CIMB] reported 3Q20 results of MYR 194 mn, declining MYR 83 mn (30.0%) linked quarter. However, when we exclude securities gains/losses, core operating results actually came in at MYR 293 mn  - exceeding 2Q20 operating losses of MYR 58 mn; and *Credit Risk Decelerating: CIMB’s NPLs declined MYR 999.9 mn (7.5%) to MYR 12.9 bn, and represent 3.38% of total loans – improving 24 bp linked quarter. With NCOs of MYR 1.2 bn, we find that net new NPLs increased MYR 187.5 mn or 5.6% on an annualized basis. Despite the improvement, we believe that reserve cover is too light by MYR 1.5 bn – which represents just over three quarters of profit before tax. 

*Provision Cover Being Shored Up: On May 31, 2020, BDO Unibank (BDO.PM) [BDO] announced a PHP 20 bn special loan loss provision in anticipation of the economic impact of the COVID-19 Crisis in addition to the PHP 2.3 bn loss provision during 1Q20;*Capital Raise Potential: The upfront provision will also cause BDO’s CET1 ratio to decline an outsized 60 bp to 12.10% - raising concerns of a capital raise given BDO’s unrealized losses at BDO Life, decelerating loan growth, narrowing margins, and trading volatility, and even greater provisions than what were announced; and*Watch Other ASEAN Banks: BDO’s loan classification system is likely not flexible enough to quickly downgrade its portfolio during periods of stress.  This is particularly disturbing as BDO is amongst the most trusted banks in the Philippines and ASEAN, which certainly calls into question what competitor loan and securities portfolios look like.

*Provision Cover Being Shored Up: On May 31, 2020, BDO Unibank (BDO.PM) [BDO] announced a PHP 20 bn special loan loss provision in anticipation of the economic impact of the COVID-19 Crisis in addition to the PHP 2.3 bn loss provision during 1Q20;*Capital Raise Potential: The upfront provision will also cause BDO’s CET1 ratio to decline an outsized 60 bp to 12.10% - raising concerns of a capital raise given BDO’s unrealized losses at BDO Life, decelerating loan growth, narrowing margins, and trading volatility, and even greater provisions than what were announced; and*Watch Other ASEAN Banks: BDO’s loan classification system is likely not flexible enough to quickly downgrade its portfolio during periods of stress.  This is particularly disturbing as BDO is amongst the most trusted banks in the Philippines and ASEAN, which certainly calls into question what competitor loan and securities portfolios look like.

Malaysia

Public Bank Berhad provides a range of banking and financial services which include leasing and factoring, stock and futures broking, financing for the purchase of licensed public vehicles, and other financial services. The Group's overseas operations include branches in Hong Kong, Sri Lanka, Laos, Cambodia, and Vietnam.

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Public Bank (PBK MK)

CTOS Digital IPO Trading - Strong Demand

CTOS Digital (CTOS) raised around US$291m via its Malaysian IPO. It is majority owned by Creador, a PE firm. In this note, we will talk about the...

Sumeet Singh

CIMB Group – A Positive Turn

CIMB GROUP: CIMB core results improved 5.1x linked quarter, driven by NIM expansion, loan growth, and decline in loss provisions. Loss reserves are...

Thomas J. Monaco

CIMB Group – Heading Deeper Into the Woods

CIMB GROUP: CIMB reported 4Q20 results improved 9.3% linked quarter, and highlighted by a massive reduction in its tax rate and an enormous...

Thomas J. Monaco

CIMB Group – Reserve Cover Light Still

CIMB GROUP: Operating results exhibited linked quarter improvement, although stated results declined. Reserve cover remains quite light despite...

Thomas J. Monaco

BDO Unibank – Is A Capital Raise Next?

*Provision Cover Being Shored Up: On May 31, 2020, BDO Unibank (BDO.PM) [BDO] announced a PHP 20 bn special loan loss provision in anticipation of...

Thomas J. Monaco

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