CIMB Group’s prospects remain in tact: PublicInvest

KUALA LUMPUR: CIMB Group Holdings Bhd’s prospects remain in tact, although its near-term growth will likely fall short of expectations, Public Investment Bank Bhd said.

CIMB Group’s Malaysian operations would continue to provide a backstop to regional weaknesses, PublicInvest wrote in a report today after the bank’s quarterly meeting with the investment fraternity to provide some updates on its recent operational developments.

“While not skirting around the issues and current challenges in its Indonesian operations, management is confident that it is a lot more prepared and will be able to ride out this period better.

“Nonetheless, near-term growth will likely fall short of expectations however. To this end, we are lowering our financial years 2018 to 2020 earnings estimates by an average 5.2 per cent to account for slightly lower margins going forward, while also adjusting for translation-related effects owing to currency weaknesses,” it explained.

PublicInvest said there remains scope for earnings upsides particularly if the group’s regional exposures made turnarounds earlier-than-expected.

“We remain optimistic of the group’s longer-term prospects, pockets of near-term challenges notwithstanding, and retain our ‘outperform’ call,” it added.

MIDF Research remains optimistic of CIMB Group’s outlook too.

“While we recognised that the Group may be facing some headwinds in terms of its income this year, we also opine that lower OPEX (operating expenditure) and provisions will be a moderating factor.

“In fact, the Group have been performing more or less within our expectations thus far. We believe that some of the headwinds will normalise in FY19 and the group’s earnings potential remains intact. Therefore, we do not see a reason to change our ‘buy’ recommendation.”

MIDF Research made no change to its target price of RM7.85 for the stock.

Source: NST