- Outright winner is MBSB with potential cash option at MYR2.82/share (+19% upside).
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Positive for RHB - upgrade to BUY with a higher TP of MYR10.45. Positive for OSK with a FV MYR2.64.
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HOLD on CIMB with an unchanged TP of MYR7.60.
What’s New
CIMB-RHB-MBSB has announced details of their merger which entails taking MBSB private at MYR2.82/sh, and merging CIMB and RHB via a share swap of 1.38 CIMB shares for every 1 RHB share.What’s Our View
The outright winner, is MBSB (MBS MK; Not Rated, FV: MYR2.82), which is to be taken private at MYR2.82/sh. Investors will have an option of cash or RCPS in a new unlisted mega-Islamic bank, which would likely be palatable only to strategic shareholders.The deal is neutral on CIMB, whereby we estimate a post-merger dilution in FY15 ROE to 11.4% from 12.3%. Pegging on a lower FY15 P/BV target of 1.35x (FY14 1.7x previously) results in an unchanged TP of MYR7.60, which translates to a FY15 PER of 12.2x, in line with Maybank. We maintain our HOLD call on CIMB.
Valuing CIMB at MYR7.60/sh and taking into account the 1.38 swap ratio, RHB would be valued at MYR10.45 (+20% upside). Our TP is raised to MRY10.45, and we upgrade RHB to BUY from HOLD.
OSK (OSK MK; Not Rated) could eventually hold just 3% in the enlarged entity and we think it would make commercial sense to dispose off this shareholding. On revaluing its stake and applying a 20% discount to its RNAV, we derive a FV of MYR2.64 (+15% upside).
Key risks at this juncture would be (i) regulatory approvals, (ii) EPF’s right to vote on this deal and (iii) Aabar’s acceptance.
Source: Maybank Research - 10 Oct 2014
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