KUALA LUMPUR, Aug 30 — CIMB Group Holdings Bhd shares rose in the morning session today as investors remained cautiously optimistic on the company’s outlook after posting weaker second quarter financial results.
At 11.37am, CIMB shares gained seven sen to RM5.01 with 4.49 million shares traded.
Public Investment Bank in a research note today said CIMB still managed to record a net profit of RM2.7 billion for the first half of financial year 2019, making up 54 per cent of the investment and 55 per cent of consensus full-year estimate, despite posting a 24 per cent year-on-year weaker net profit in the second quarter.
“We deem these numbers broadly in line on expectation of potential margin compressions and higher credit costs ahead,” it said.
On a positive note, it said loan provisions continue to show positive trajectory while better capital market activity is contributing to stronger trading and foreign exchange related income.
“We see scope for earnings upsides, particularly if the company’s regional exposures make more significant turnarounds,” it said.
It said with its Indonesian operations being primed to play a more significant role, the investment bank is optimistic over CIMB’s longer-term prospects despite pockets of near-term challenges.
AllianceDBS Research in a separate note said CIMB is still very much in a transition over the next two years with expenses being front-loaded to invest in growth drivers for its Forward23 strategy, which aims to accelerate growth and future-proof its business.
“Though there have been positive surprises in the form of adjustments and disposal gains, it remains to be seen if the group can generate returns on a sustainable basis.
“We are of the view that CIMB’s target of 12-13 per cent return on equity by 2023 is optimistic and would require more favourable market conditions,” it said.
Public Investment has retained an “Outperform” call on CIMB with an unchanged target price of RM5.80.
AllianceDBS has maintained its “Hold” call and target price of RM5.35 on CIMB. — Bernama
