Huge chunky oil & gas allowances ahead for CIMB, says HLIB Research

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KUALA LUMPUR (April 29): Hong Leong Investment Bank Research (HLIB) had maintained its “Buy” rating on CIMB Group Holdings Bhd at RM3.41 with a lower target price of RM4.45 (from RM4.70) and said during a briefing yesterday, CIMB management’s tone was cautious and little FY20 guidance was given, amid Covid-19 uncertainties.

In a note today, HLIB said the most painful update was there will be huge chunky oil & gas allowances ahead.

“Hence, we cut our FY20/21 profit forecasts by 19%/4%.

“While the flurry of bad news from its oil & gas exposure does not help sentiment, we would rather see the elephant in the room being addressed this year followed by a sharp V-shape recovery in FY21.

“We still like CIMB for its inexpensive valuations (trading >-2SD P/B and below global financial crisis level). Retain Buy but with a lower GGM-TP of RM4.45 (from RM4.70), based on 0.72x FY21 P/B,” it said.

The research house said CIMB looks to maintain its payout ratio at 40-50% but may reverse its earlier plan to lower the electable portion of its dividend reinvestment scheme to conserve cash and capital.