Hot Stock CIMB flat after falling on outlook, broader market loss

by **Cals** Sun 26 Jul 2015, 02:56

Hot Stock
CIMB flat after falling on outlook, broader market loss

KUALA LUMPUR (July 24): CIMB Group Holdings Bhd ([You must be registered and logged in to see this image.] Financial Dashboard) erased losses after falling earlier on expectation that the second half of 2015 will remain tough for the financial services provider, due to challenging economic conditions in Thailand and Indonesia, where it has a presence.
At 12:30pm, CIMB (fundamental: 1.05; valuation: 2.25) settled flat at RM5.50, with some five million shares traded. The stock erased losses from its intraday low so far today at RM5.43.
For comparison, the FBM KLCI fell 2.39 points or 0.1% to settle at 1,720.05.
Yesterday, CIMB group chief executive officer Tengku Datuk Zafrul Tengku Abdul Aziz said the group faced greater challenges in Thailand and Indonesia, as compared to Malaysia.
“The challenges are bigger in Thailand and Indonesia for us. Malaysia is stable, not showing signs of weakness or improvement,” Tengku Zafrul told reporters at the launch of the CIMB Bumiputera Vendor Development Programme yesterday.
CIMB announced earlier this month that the group completed its mutual separation scheme (MSS), which saw the employment termination of 11.1% of total workforce in Malaysia and Indonesia.
While the group will incur RM443.3 million in MSS costs, the resulting savings from the headcount reduction was estimated to be RM291.6 million per year, starting in 2016.
Analysts have been less optimistic about CIMB. UBS Securities Malaysia Sdn Bhd downgraded its earnings estimates for CIMB by up to 6%, in anticipation of reduced net interest margins and after taking into account its MSS cost.
In a note, UBS analyst Chris Oh said the earnings downgrade came with a lower target price for CIMB shares at RM5.80, versus RM6.30 previously. According to UBS, CIMB is scheduled to announce its second quarter and first half financials this August 28.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)