Kenanga Investment Bank Bhd has upgraded RHB Capital Bhd to “outperform”, cut Malaysia Building Society Bhd’s (MBSB) target price but made no changes to CIMB Group Holdings Bhd, following the cessation of discussions on a proposed merger.

“Taking a cue from this development, we are of the view that there is lower likelihood to see any other domestic merger efforts in the short run,” it said in a note today.

It said the proposed deal was called off due to limited value creation amid the poor current economic condition, disallowing potential synergies to be realised.

Kenanga Research has kept RHB’s target price of RM9.35 to “outperform” and cut MBSB’s target price to RM2.65 from the RM2.82 offer price.

“We keep our ‘neutral’ view on the sector as it still lacks re-rating catalysts.”

The research house said structural and cyclical headwinds such as muted loans growth, narrowing net interest margin, weak capital market activities and higher credit costs are expected to be seen this year.

Meanhwile, AllianceDBS Research has downgraded CIMB’s target price to RM6.20 but maintained its “hold” recommendation after taking into account further weakness expected in provisions and non-interest income.

“For similar reasons, we downgrade RHBCAP to ‘hold’ and revise our target price to RM8.20, we had previously pegged RHBCAP’s target price at 1.3 times the merged entity’s book value,” said the research house.

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