CIMB Below Forecast?

In a bear market, good news are generally ignored. Investors do not react much to good news, but tend to react excessively to bad news.

For CIMB, it seems like there is no single special reason for its recent dive in share price. It's below RM7 today, a psychological support? The major concern seems to be the slower than expected growth, which does not meet some people's forecast, and of course the Indonesia issue may also weigh in.

Anyway, EPF and Mitsubishi Financial group are accumulating CIMB's shares in August.

Everyone is waiting for Bernanke's speech today.

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KUALA LUMPUR: The stock of Malaysia's number two lender took a beating yesterday, closing 4.6 per cent down to a one-year low of RM7.25, on concerns of slower growth this year.

Analysts said as the stock has a lot of foreign owners, it was no surprise that there were more sellers than buyers since Wednesday, despite CIMB Group Holdings Bhd's record second quarter earnings on Tuesday.

"It is similar to Axiata's stock. Axiata also has high foreign shareholding and it suffered the same fate," said one analyst.

The analyst said since CIMB has always commanded a high valua-tion, a slight concern over its performance can easily affect the stock price.

CIMB's earnings rose 9.1 per cent to a record RM970.01 million in the second quarter ended June 30 2011 from RM889.46 million a year ago.

Despite that, it was considered to be still 9.2 per cent below the consensus of most analysts.

They attributed the sell down of the stock to mostly concerns over slower loans and non-interest income growth.

MIDF Research for one has cut CIMB's earnings forecast for 2011 by 6 per cent due to the low loan growth.

OSK Investment Bank equity capital market head Gan Kim Khoon said CIMB's results were below the expectations of many.

"And there are concerns over its stake in Indonesia's Bank Niaga as CIMB has got more to lose with the new ruling compared to Maybank," he said.

CIMB: Why 2 Long Black Candlesticks?

CIMB has just achieved a record in its 2011Q2 profit. However, its share price fell 54sen (7%) with high volume from RM7.79 to RM7.25 in just 2 days! Why? I also want to know. Generally market sentiment is currently lifted a bit. If no particular devastating bad news, then may be can consider to buy already...??

From Reuters:

CIMB’s second-quarter net profit of RM970.02 million exceeded a JP Morgan forecast, which pegged the quarter’s earnings at RM942 million. 

Eighteen out of 24 analysts tracked by Thomson I/B/E/S have a “Strong Buy” or “Buy” call on CIMB, while five have “Hold” calls. 

     CIMB is facing selling pressure

Perhaps the CEO is too "honest" and pessimistic?

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Group chief executive Datuk Seri Nazir Razak said: 

“We had another quarter of record profits in the second quarter, underpinned by a strong uplift from our Malaysian consumer banking operations and continued high growth at CIMB Niaga.

“We are, however, still behind our return on equity (ROE) and balance sheet growth targets for the year as we have been treading more cautiously given the uncertain global environment.”

“We are maintaining our 17% ROE target, but with a cautious outlook, meaning that we are more conservative to risk. We maintain more liquidity, more capital and more diversification of portfolio,” 

Nazir said his caution stemmed from the weakness in Western economies, which were not just volatile, but also diminishing in trust.

This could potentially cause a repeat of 2008 (credit crisis in the United States).

“Right now, India, China and the Middle East are pre-occupied and cannot offset the impact like what they did in 2008,” he said.

“The Asean region is strong, but it doesn't have much fiscal space to offset the deteriorating external outlook. Unlike in 2008, we may not be as immune to that crisis this time.”

Some of the indicators to watch out for would include a more credible debt resolution plan from the Western world, he said, adding that a more concrete plan by the West was absolutely needed.

“Another thing favourable could be a big drop in oil prices which will lower cost to the United States and could be a big boost to the US economy. These are some of the indicators we would be looking at.”

On talk that the Indonesian central bank was to enforce a ruling for foreigners to pare down their stake to below 50%, Nazir said this was the prerogative of the Indonesian government, and if it really happened, then CIMB would abide by the rules. Presently, CIMB holds a 96% stake in PT Bank CIMB Niaga Tbk.

“We will be disappointed if we have to reduce our stake in Bank Niaga, but we hope to be able to continue to fully invest in it. My pre-emptive measure is to pray very hard,” said Nazir.

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Is it because of the concern on Indonesia CIMB Niaga's stake? Is it something related to MBF holdings? Is it because of the decreasing revenue despite raised profit? Is it because Maybank has better financial results and dividend payout? Is it just panic-selling? Is it others?

Perhaps CIMB's CEO should talk in KNM's style (dead also can talk until alive).

Local Banks: CIMB in Focus?

The market has been volatile since the drastic slide on 5th Aug. Some people start to worry about a double dip, some not. The Bursa Index has fallen almost 75 points or 5%. Not so much actually. However, is the market just taking a breather and will continue to slide soon?

Perhaps it may be time to hunt for some blue chips. Here are the price movement of major local banks since 4th Aug 2011.

	4 Aug	22 Aug	% Drop
AMMB	6.49	6.40	1.40
CIMB	8.40	7.77	7.50
HLBANK	13.56	12.78	5.70
MAYBANK	8.85	8.64	2.40
PBB	13.42	12.90	3.90
RHB	9.22	8.93	3.10

Maybank and CIMB actually started their down trend journey in early July when Indonesia government plans to restrict foreign ownership of commercial banks there. This regulation may go into effect as early as Q4 this year. Both CIMB and Maybank have business there, especially CIMB, with its 97.9% owned PT Bank CIMB Niaga.

So, CIMB's share fell the most among all the banks. Then, is it the most "valuable" buy at the moment?

Indonesia has about 100 banks and 47 of them have foreign ownership. CIMB Niaga is Indonesia's fifth largest bank by asset size with 845 outlets! It just recorded a RM545mil net profit for the 1HFY11 ended June 2011, a 37% increase from a corresponding period a year ago. If foreign ownership restriction is implemented, it will affect CIMB's earning.

CIMB recently entered into India market for the first time with its opening of Mumbai's office.

There is a source which says that MBF holdings is keen to offload its credit card business and CIMB will be the one who will take over it. This news may be announced "very soon" and surely will benefit CIMB a lot.

CIMB is going to announce its latest financial result soon. So lets see how it is.