CIMB dips 3% as weaker profit misses forecast

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KUALA LUMPUR (March 2): CIMB Group Holdings Bhd dipped as much as 18 sen or 3% to RM5.77 after the financial services provider reported a drop in full-year profit, which came in lower than market expectation.

As at 11.51am, CIMB (fundamental: 1.35; valuation: 2.1) had pared losses to trade at RM5.91 with 3.68 million shares changing hands.

Last Friday, CIMB said net profit fell 80.7% year-on-year to RM200.32 million in its fourth quarter ended December 31, 2014 (4QFY14) from RM1.04 billion a year earlier, while revenue fell to RM3.67 billion from RM3.8 billion.

Full-year FY14 net profit declined to RM3.11 billion from RM4.54 billion a year earlier. Revenue was lower at RM14.15 billion versus RM14.67 billion.

Maybank Investment Bank Bhd said in a note today CIMB's core net profit of RM3.2 billion was 16% below Maybank Investment's forecast and 18% below consensus.

“The worst is probably over but we see little near-term catalyst – 1Q15 provisions are still an uncertainty, restructuring costs will have to be incurred before the synergies flow through, capital market activity will still be weak and operational turnaround at Niaga will be gradual,” Maybank Investment said.

Maybank Investment cut its FY15 and FY16 net profit forecasts for CIMB by 5% and 2% respectively but maintained its “hold” rating for CIMB shares with a target price of RM5.70.

Affin Hwang Investment Bank Berhad said CIMB’s earnings outlook “remains unexciting”, given a moderating domestic economic outlook and sluggish capital market activities.

In a note, Affin Hwang said CIMB's asset quality would continue to see new impairments.

(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.)