KUALA LUMPUR: Maybank Investment Bank Research has maintained its Buy call on CIMB and target price of RM7.50 based on a FY18 profit beore tax of 1.3x.
"The recent share placements have depressed CIMB’s share price but valuations are attractive, in our view. At RM6.18, CIMB trades at a prospective FY18 PER of just 10.6x versus a historical mean of 13.4x, with strong projected earnings growth of 27% in FY17 and 16% in FY18."
Following a meeting with CIMB management, Maybank IB Research said the group's credit cost guidance is likely to be little changed post-MFRS9.
"Management reiterates that the Day 1 MFRS9 impact is expected to shave 50bps off the group’s CET1 ratio (estd. fully loaded 10.6% currently), which we estimate would involve RM1.5bil worth of additional provisions.
"We estimate a 3% decline the group’s FY18 book value of equity per share as a result, but an enhancement in FY18E return on equity to 10.9% from 10.6%. Assuming our Gordon Growth Model parameters are unchanged, the effect would be a 20sen enhancement to our target price," it said.
Against CIMB's credit cost guidance of under 60bps for FY18s, Maybank IB Research has imputed a credit cost assumption of 58bps. It has assumed a credit cost of 65bps for FY17 versus CIMB management's guidance of 60-65bps.
It added that 2H17 credit cost is expected to remain elevated in Thailand and Singapore but stable in Malaysia and downward trending in Indonesia.
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