CIMB Research retains Underperform on Hong Leong Bank

KUALA LUMPUR: CIMB Equities Research is retaining its Underperform recommendation on HONG LEONG BANK BHD [] and RM13.80 target price.

It said on Monday, Aug 15 that the positives from The Edge’s article on Hong Leong Bank are (1) the successful completion of the first phase of the group’s integration with EON Bank Group, which resulted in minimal disruptions to its day-to-day operations, and (2) the possible sale of MIMB Investment Bank, which would reduce the purchase cost for EON Bank.

“But we foresee challenges for the consolidation process including management distraction and attrition of key management/customers, which pose short-term earnings risks,” it said.

CIMB Research said it maintained its earnings forecasts, RM13.80 target price and underperform rating.

“The potential slowdown of business growth due to merger distractions is a potential de-rating catalyst for Hong Leong Bank, along with its above-sector valuation and 8-13% EPS dilution from the rights issue. We prefer Maybank for exposure to the sector,” it said.