• CIMB share prices tumbled 29% from YTD high of RM6.32 (7 Apr) to a low of RM4.46 (30 Sep) following a poorer-than-expected 2Q15 results and expectations of a challenging 3Q15 outlook amid concerns of potential spike in impaired loans, slower-than-expected loan growth and impact on non-interest income during a slowdown in capital markets.
• Values resurface after recent plunge in share prices. We opine that recent selldown to 1.0x P/B (against average historical 10-year 1.9x and peers ’ 1.2x) and 9x 2016 P/E (vs. historical average 10-year P/E of 15.4 x and peers ’ 9.2x). have been over-exaggerated (FIG2). Moreover, dividend yield is decent at 4.4% for FY16, which is 42% higher than its peers’ 3.1%. Hence, such valuations have provided a sufficient margin of safety and cushion further sharp share price decline, boosted by expectations that Valuecap will start to invest into the equity market in late Nov or early Dec and favourable seasonal Nov/Dec performance due to window dressing activties.
• Poised for further relief rally. We believe recent rebound from 52-week low of RM4.46 has more legs, supported by bottoming up oscillators and higher lows formations. If share prices are able to stage a strong breakout above immediate resistance of RM4.80 (50-d SMA), a resumption of uptrend is on the cards towards RM4.90 (38.2% FR) and RM5.05 (50% FR) levels. Our long-term objective is RM5.18 (18 Sep high and 61.8% FR).
• Key supports are RM4.65 (hourly mid Bollinger Band) and RM4.56 (2 Nov low). Cut loss at RM4.51.

Source: Hong Leong Investment Bank Research - 5 Nov 2015