Malaysia: MIDF is neutral on Nazir Razak’s departure from CIMB
- Islamic Finance
- 8 months ago
MIDF Research is neutral on the news of Datuk Seri Nazir Razak stepping down from his position as CIMB Group Holdings Bhd chairman and all other positions within the CIMB group of companies by Dec 31, 2018 – after serving the group for 29 years.
The research house said this is because the Group could be considered ‘institutionalised’ and does not depend on an individual.
"It had a transition in the position of CEO (chief executive officer) in 2014 without any detrimental effect,” it said in a research note today.
MIDF said the group continues to have solid operations and earnings potential. For example, as at first half of financial year 2018, normalised net profit grew 3.3 per cent year-on-year despite net income declining 5.2 per cent year-on-year as it was moderated lower loan provisions which fell 29.4 per cent year-on-year to RM746 million.
Also, it said since the introduction of its T18 initiative, management have managed to contained operating expenditure (opex).
In the second quarter of financial year 2018, CIMB’s opex fell for the second consecutive quarter by 2.5 per cent year-on-year.
“Furthermore, we opine that the group is on track to achieve its financial year 2018 targets, with possible headwinds in terms of income to be moderated by containment in expenses and credit cost,” it said.
MIDF said concurrently, it has maintained its financial year 2018 and 2019 forecasts for CIMB.
MIDF has reiterated its “buy” call on CIMB with an unchanged target price of RM7.85.
“In our opinion, the fundamentals of the group remains solid and the recent announcement will not have any negative impact.
“Earnings growth will be driven by lower opex and credit cost, while traction for its loans growth will help to mitigate the pressure on income.
“We also believe that this could resolve any overhang issue with the stock and may turn investors' sentiment around. At currenct valuation, we believe that the stock is undervalued given its prospects and have lagged its peers recently,” it said.
Source : New Straits Times