- The press reported that there is a proposal to restructure
RHB Capital Bhd (RHB Cap) in an exercise that will lead to its privatisation.
It has been reported that the proposal is extensive, with an eventual target to
relist RHB Bank later on an enlarged basis together with the subsequent
injection of Malaysia Building Society Bhd (MBSB) at a later stage.
- The rationale for the proposal is to prepare the group to
meet changes under the Financial Services Act (FSA) as well as create a more
efficient platform for dividend payments and further strengthen the capital
base.
- It was further reported that the timing of the proposal,
as well whether the major shareholders of the group, including the Employee
Provident Fund (EPF), are agreeable to the proposal, remain unknown.
- The proposed privatisation, if true and if prompted by the
FSA, is a surprise to us. RHB Cap has disclosed that its group common equity
Tier 1 (CET1) ratio is estimated at 8.6% in 4QFY12 assuming phase-in
arrangements allowed in relation to its hybrid capital. The only item that may
need to be stripped off to gauge the group common equity ratio without any
phase-in impact would be its hybrid capital, which is about RM601mil. Stripping
this off, we had earlier estimated group CET1 ratio at 8.1%, still a
comfortable level.
- Thus, we believe the privatisation proposal would be
largely to enable the takeover of MBSB. MBSB’s total market capitalisation is
currently RM4.04bil, with EPF’s stake at 66.1%. Given the recent appreciation
in MBSB’s share price, we estimate that RHB Cap’s group CET1 ratio would be
halved if it was to take over MBSB now.
- RHB Cap’s total market capitalisation is now RM21bil, with
EPF’s stake estimated at 41.4% following the issuance of new 245mil RHB Cap
shares in November 2012 for the takeover of OSKIB. The privatisation of RHB
Cap, if true, will cost about RM12.4bil for the remaining 58.6% stake that is
not owned by EPF.
- We expect RHB Cap’s share price to be underpinned by the
privatisation rumour. We remain positive on RHB Cap.
Source: AmeSecurities
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