Wednesday, 2 May 2012

Alliance Research downgrades CIMB To Hold, cuts target price to RM7.92

KUALA LUMPUR (May 2): Alliance Research has downgraded CIMB Group Holdings Bhd to a Hold from Buy and cut it target price for the stock to RM7.92 from RM8.80 previously following a report that that Bank of Indonesia (BOI) was planning to impose new caps on single shareholder stakes in the country's commercial banks as early as next month.

The research house it viewed this development to be potentially negative for CIMB and Maybank, given their majority stakes in the respective Indonesia banks.

At present, CIMB owns 96.9% of CIMB Niaga while Maybank owns 97.5% of Bank Internasional Indonesia (BII).

Therefore, the implementation of this regulation could force these banks to pare down their stakes in respective Indonesian subsidiaries and dampen their earnings prospects, it said in note April 30.

“Among the two domestic banking giants, we expect CIMB to be more severely impacted, given that CIMB Niaga’s significant contribution to the group’s bottomline and to remain its key earnings driver going forward.

“For FY11, CIMB Niaga contributed about 30% of CIMB’s PBT while BII contributed 5% of Maybank’s PBT, respectively,” it said.

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