CIMB Group Holdings Bhd's strides towards decarbonisation and robust financial performance were highlighted by Kenanga Investment Bank in its Malaysia Company Update today (July 4, Thursday).
Kenanga maintains an OUTPERFORM rating on CIMB with a target price (TP) of RM7.60, derived using the GGM (Gordon Growth Model)-derived PBV (Price-to-Book Value) method, CIMB Group Holdings Bhd's target price of RM7.60 is calculated based on a cost of equity (COE) of 11.2%, terminal growth (TG) of 3.5%, and return on equity (ROE) of 11.5%. This valuation underpins CIMB's commitment to achieving net-zero operational greenhouse gas emissions by 2030, with extended targets for 2050, placing it ahead of local peers in environmental sustainability efforts. The bank's 4-star ESG score further bolsters its outlook, supporting Kenanga's positive stance on CIMB as one of its top picks for Q3CY24.
CIMB has outlined comprehensive decarbonisation initiatives targeting high-emitting sectors such as oil & gas and real estate, collectively forming a significant portion of its loan book. These efforts include refraining from new financing for upstream oil fields and promoting sustainable energy solutions to reduce operational emissions intensity.
The real estate sector, constituting 38% of CIMB's total loan portfolio, remains pivotal in its decarbonisation strategy. By financing energy-efficient buildings and supporting renewable energy projects, CIMB aims to mitigate the sector's carbon footprint while enhancing its own ESG credentials.
In addition to sustainability efforts, CIMB is enhancing financial inclusivity by reaching out to vulnerable communities with insurance and wealth-building products. This initiative aims to foster long-term financial stability among underserved groups, potentially translating into sustainable growth for the bank.
Kenanga reiterates its optimistic outlook on CIMB's financial performance, forecasting steady growth in net interest income and non-interest income through FY25. With a robust return on equity (ROE) trajectory and attractive dividend yields, CIMB remains well-positioned to deliver shareholder value amidst a challenging economic environment.
The stock has demonstrated resilience with a year-to-date price increase of 20.3%, outperforming the broader market's 11.0% gain. This performance underscores investor confidence in CIMB's strategic initiatives and financial health.
Kenanga's recommendation to maintain an OUTPERFORM rating and TP of RM7.60 reflects CIMB's strong fundamentals, proactive sustainability measures, and promising growth prospects in the regional banking sector.