MIDF maintains Buy on CIMB, TP at RM7.55

KUALA LUMPUR: CIMB Thai could begin to show meaningful contribution to CIMB Group's earnings following a strong earnings performance in the first quarter, says MIDF research.

In its recent earnings announcement, CIMB Thai showed strong growth in earnings led by NII expansion and a drop in provisions. 

"CIMB Thai 1QFY19 net profit grew +92.4%yoy to THB325m. This was also a turnaround in earnings from the losses in 4QFY18," said MIDF.

NII rose +4.3%yoy to THB2.71b despite lower NIM where it compressed by -67bps yoy to 3.31%. 

The NII growth was supported by higher gross loans which increased +8.0% y-o-y to THB230.9bil, and higher interest income on investments. 

Meanwhile, the NIM compression was due to higher cost of fund. 

The group's provisions in the quarter fell 16.4% y-o-y to THB971mil. 

"We opine that this was partly from the sale of NPLs. 

"The gross NPL stood at THB10.0b, with a stable gross NPL ratio of 4.3%, unchanged from the previous quarter and improved from 5.2% as at 1QFY18," said the research house.

Moving forward, MIDF also expects Indonesia's CIMB Niaga to have a positive impact on the group's earnings.

"We also believe its other franchise in Indonesia, CIMB Niaga, will boost the Group's earnings as the pressure on the Rupiah should subside in FY19 following US Fed's decision to pause its policy rate hike cycle

"Meanwhile, we expect the Group's operation in Malaysia to continue to leading its earnings growth."

The research house maintained its buy call on CIMB with a target price of RM7.55.