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Tuesday, October 25, 2011

CIMB - A Reality Check (OSK)

The group’s Indonesian subsidiary, CIMB Niaga, yesterday released 3QFY12 earnings that reflect a slowdown in quarterly earnings growth. At our recent meeting, however, CIMB Group’s management indicated that there was no change in its immediate to medium term cautious stance. Maintain NEUTRAL. Its current valuation at 1.93x FY12 PBV is marginally above the group’s 6-year historical mean PBV of 1.85x, while it has previously de-rated to as low as 1.1x PBV (-2 std deviation from mean PBV) at the peak of the 2008/09 global financial crisis. As such, we would advocate more aggressive buying on the stock only when valuations de-rate closer to -1 std deviation (ie: 1.6x to 1.5x PBV ~ RM6.10). Maintain FV at RM7.62, based on 15.3% FY12 ROE forecast and 2.05x FY12 PBV. Maintain NEUTRAL.

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