CIMB Group stages a technical rebound, up nearly 3%

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KUALA LUMPUR (June 17): CIMB Group Holdings Bhd, the country’s second largest lender, saw its share price climb nearly 3% or 16 sen to RM5.51 in afternoon trading today. However, the trading volume was not high, with 4.98 million shares having changed hands as at 3.15pm.

Kenanga Research said the recent bash down on CIMB (fundamental:1.05; valuation:2.25) could offer a potential trading opportunity for investors in its technical report.

In a technical report today, Kenanga said the outlook for CIMB remains bullish.

The research firm said: “CIMB continues to trend down further towards its strong support level of RM5.18, with its momentum indicators also in the oversold region.

“Shall the share price consolidate towards RM5.18 for CIMB, investors should keep an eye for a reversal signal to confirm a rebound play, before entering the stock,” it said.

However, AmResearch maintained its hold rating on CIMB with an unchanged fair value of RM5.40, based on an unchanged normalized Financial Year 2015 (FY15) forecast return of equity (ROE) of 10.4%, leading to an unchanged fair price to book value (P/BV) of 1.2 times.

The research house said that CIMB’s foreign shareholding had decreased further to 30.0% in end-May 2015, from 30.7% in end-April 2015.

This is following the announcement of its 1QFY15 results last month.

It said CIMB’s foreign shareholding has breached a new multi-year low since four months ago, and has now fallen below the trough of 31.3% recorded in November 2008, during the external crisis.

“We estimate the net number of shares sold by foreign shareholders at 59 million shares in May 2015, as compared to an estimated net buying of three million in April 2015,” Am Research said.

On a year-to-date basis, there was a net selling of 208 million shares by foreign shareholders, from January to May this year. This compares to a total net foreign buying of 127 million shares for the whole of 2014, and net selling of 375 million shares in 2013, it added.

“In terms of earnings outlook, we expect the second quarter to remain subdued, given the company will likely be providing for its one-off mutual separation costs (MSS). There is also further uncertainty in terms of revenue from investment banking operations, as well as overall asset quality.

“We think there is further earnings uncertainty at this current cycle. This is based on the latest indications from its latest results and briefing,” AmResearch commented.

(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.)