KUALA LUMPUR: CIMB Group
Holdings Bhd's long-term prospects remain secure with Malaysia continuing to be a significant earnings growth driver in 2019 while improvements are expected for Indonesia and Thailand.
"While there are pockets of potential weaknesses in certain business segments, none are alarmingly worrisome that would necessitate changes in views," said PublicInvest research.
In a Thursday note, the research house maintained its outperform call for the counter with an unchanged target price of RM6.50.
On Indonesia, it said CIMB management sees the its operations' net interest margins settling at between 4.8% and 5%.
It added that near-term earnings improvements are likely to come from asset quality improvements (ie. lower provisions) given the current lack of drivers.
Loans growth is expected to improve in 2019, though not expected to be significantly better than 2018’s low single-digits.
"Activity is likely to be seen more toward 2H2019 given uncertainties arising from the country’s Presidential Elections in 1H."
It said with fewer rate hikes expected in 2019, margin compressions in Indonesia are expected to be less pronounced although still likely in the five to 10bps region.
Meanwhile, in Thailand, earnings growth will be driven by the retail segment, specific SME segments and operationa efficiencies.
"Weakness in recent financial numbers are part-planned (higher business expansion costs due to investments in personnel and IT infrastructure), and part regulatory (topping up of general provisions deemed insufficient by the country’s central bank)," said PublicInvest.
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