Knee-jerk selloff presents trading opportunity. Rattled by a tepid 4Q21 results, underwhelming FY22 guidance, credit loss of RM281m in 2021 due to a payment glitch, as well as additional pre-emptive provisioning in its FY21 results release for higher loan loss, the stock took a heavy beating by 13% from a 52-week high of RM5.75 (28 Feb) to RM5.00 (2 Mar) before ending at RM5.10 yesterday. We feel that the slump was overdone and current valuations are undemanding amid slight near term asset quality concerns. Nevertheless, we continue to remain optimistic over CIMB’s longer-term prospects underpinned by its F23+ initiatives and opine that this should be adequately mitigated by its provisioning overlays.

At current levels, CIMB provides an attractive risk/reward opportunity as the negatives are largely reflected, given its undemanding valuations of 8.9x FY22E P/E (-13% vs big-cap peers) and 0.89x P/B (-33% vs peers), supported by a decent 4.7% DY (vs peers’ 4.5%) and FY21-23 core NP CAGR of 12%. Moreover, the stock is trading at - 17.4% on 5Y historical mean of 13.2x P/E and -11% on 5Y historical mean of 1x P/B. Overall, being a large cap and high liquidity, the stock is bound to be viewed as a key proxy to economic recovery and reopening theme, boding well for trading sentiment.

Bullish Harami pattern. After a 2-day 11.9% rout, the stock could trend sideways briefly before staging a technical rebound following the bullish Harami pattern. A successful breakout above RM5.28 (38.2% FR) would spur share prices toward RM5.38 (50% FR) before hitting our LT objective near RM5.50. Collection range is RM4.90-5.10 whilst cut loss is pegged at RM4.84 zones.

Source: Hong Leong Investment Bank Research - 4 Mar 2022