Company Update � CIMB Group (REDUCE,
maintain)
- Forecasts slashed � more downside risks
CIMB Niaga�s 3Q14 results continue to disappoint due to a spike in
provisions, with more downside risks expected in 4Q14. We have slashed our
FY14-16E net earnings by 4.9-8.7%, primarily to account for additional
provisions and lowered loan growth to 7.0-7.5%. As a result, our price target
has been lowered to RM5.76 from RM6.63. All in, we do not see much reason to
turn overly optimistic on the CIMB group despite the proposed merger with RHB
Capital and MBSB owing to the risk of high merger cost, challenges in value
creation, asset quality issues as well as integration risks with regards to
the proposed M&A exercise with RHB Capital and MBSB. Maintain REDUCE, we
note that our fair value for CIMB Group is almost equivalent to the merged
entity�s fair value of RM8.00.
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