- We are downgrading Alliance Financial Group Bhd, (AFG) to
HOLD from BUY, with an unchanged fair value of RM4.40/share. This is based on
an unchanged FY13F’s ROE of 13.2% and unchanged fair P/BV of 1.7x.
- AFG’s share price hit a new high recently of RM4.40, surpassing
the previous peak of RM4.31 in the past two years.
- The share price is now close to our fair value of RM4.40/share.
Given the less than 15% upside to our fair value, we are downgrading our rating
to HOLD from BUY.
- The stock is currently trading at a P/BV of 1.6x, which is
one standard deviation above the long-term average P/BV mean of 1.2x.
- We believe the share price has rerated ahead of confirmation
of the entry of DBS as a major shareholder.
- Recall that on 2 April 2012, AFG had announced that it had
received a notice from Duxton Investments Pte Ltd (Duxton Investments) that DBS
Bank Ltd (DBS) had obtained the approval of Bank Negara Malaysia (BNM) to commence
discussions to acquire Duxton Investments’49% stake in Vertical Theme Sdn Bhd
(Vertical Theme).
- Vertical Theme is a private company which holds a strategic 29.06% equity interest in AFG.
Vertical Theme has only two major shareholders, with Langkah Bahagia Sdn Bhd (a
private vehicle) holding a 51% stake.
- Duxton Investments is a wholly-owned subsidiary of Fullerton
Financial Holdings Pte Ltd, which in turn is a wholly-owned subsidiary of
Temasek. Accordingly, Temasek’s effective interest in AFG stands at 14.2%.
- If DBS is to acquire Duxton Investment’s 49% stake in Vertical Theme, it will then end up with
an effective 14% stake in AFG. There would thus be a change in majorshareholder
from Temasek to DBS.
- The other major shareholder with a larger effective stake at
15% would be Langkah Bahagia.
- We do not expect any issue in terms of the acquisition by
DBS. Thus, we expect DBS to end up with at least a 14% stake.
- The announcement on 2 April 2012 was a major positive surprise.
However, with the share price having rerated significantly since, we believe
the immediate upside potential from the entry of DBS is likely already priced in.
Source: AmeSecurities
No comments:
Post a Comment