CIMB's prospects positive: analysts
PETALING JAYA: Analysts gave CIMB Group Holdings Bhd a buy call, as CIMB Thai Bank PCL's net profit leaped close to nine fold to THB356.64 million (RM45.4 million) for the second quarter ended June 30, 2017 (Q2) against THB39.89 million a year ago, underpinned by lower bad and doubtful debts, impairment losses, operating expenses and income tax expenses.
AffinHwang Capital remained upbeat on CIMB's prospects in 2017-2019, as the group continues to focus on improving its return on equity, reducing operating expenses and expanding its loan growth.
"Overall, we have a more optimistic view on CIMB's prospects in 2017, with our earnings assumptions given the steady net interest margin (NIM) above 2.6% (compared with management's guidance of less than 2.6%); 2017-2019 loan growth target of 6%-7%; fund-based income growth of 5-6% per year; and credit costs at 53-56bps 2017-2019 (compared with 74bps in 2016)," AffinHwang said in a report.
However, it said downside risks includes further deterioration in asset quality, market competition on rates and NIM pressure.
It reiterated a buy call on CIMB, with an unchanged price target of RM7.50.
RHB Research Institute said CIMB Thai's sustained improvement in profitability in Q2 reinforces its view that the bank would see a recovery in FY17 net profit.
"That said, CIMB Thai is not a significant earnings generator at the group level. Thailand contributed 6% to CIMB's Q117 pre-tax profit after incurring a loss of RM79 million in FY16."
RHB reiterated its buy call for CIMB with a target price of RM7.10.
Kenanga Research said there is no change to its forecasts for the group as CIMB Thai contributions are unlikely to impact the group. Q117 pretax profit contribution to the group was only 6%.
"For now, pending the group 6M17 results expected at the end of next month, we keep our target price of RM6.90."
As total returns are over 10% with undemanding valuations, it revised upwards its call on CIMB to outperform.
CIMB shares closed 1.71% lower at RM6.31 today, with 21.32 million shares traded.
Meanwhile, Reuters reported that state-owned investment firm Khazanah Nasional Bhd is looking to sell a block of shares in CIMB for RM571 million-RM581 million, citing a term sheet.
The shares up for sale have been priced at RM6.31-RM6.42 per share.