CIMB a laggard compared with local banking peers

KUCHING: In view of subsiding external risks coupled with the continued mandate given to the Barisan National in the 13th General Election (GE13), local banking player CIMB Bank Bhd (CIMB) is seen to have more room for growth in the quarters to come.

“From a share price prospective, we observe that CIMB has been a laggard relative to its domestic banking peers in the past one year despite having strong fundamentals, one of the prime beneficiaries of rising business loans stemming from the rolling out of Entry Point Projects under the government’s Economic Transformation Programme and good proxy for Asean exposure,” highlighted Cheah King Yoong, an analyst with Alliance Research Sdn Bhd ( Alliance Research) in a research report yesterday.

“We believe that such relative share underperformance was mainly dragged by persistent external risk and the group is highly vulnerable to increased market risk premium with the 13th General Election drawing closer, particularly in view of its high foreign shareholdings.”

Given the subsiding external risks and domestic political uncertainties, which in Alliance Research’s opinion were the two key factors dragging the group’s share price, the analyst believed that CIMB served as the best proxy to ride on the expected relief rally post 13GE.

“In line our sector upgrade arising from the subsiding external risks and domestic election uncertainties, we have raised our target prices of CIMB from RM7.35 to RM8.66 per share, upon removing our 10 per cent blanket discount previously imposed on the group and lowering our sustainable return on equity (ROE) target from 16.5 per cent to 16.2 per cent to account for its dividend reinvestment plan and higher cost to income ratio.”