Last Fri, BNM announced that the consortium of SEA Limited and YTL Digital Capital (100% owned by YTLP) was one of 5 successful applicants for Malaysia’s maiden digital banking licenses. We are overall positive on the news. SEA’s Shopee platform is one of the largest e-commerce players with e-wallet services in Malaysia and ASEAN that has also received digital banking license in Singapore and Indonesia. YTLP will be able to leverage onto SEA’s capability and regional network, and concurrently extract synergistic benefits with YES. We uphold our BUY recommendation, with unchanged TP: RM1.05, based on 10% discount to SOP: RM1.16.

NEWSBREAK

Last Friday, Bank Negara Malaysia (BNM) has announced that the consortium of SEA Limited and YTL Digital Capital was one of 5 successful applicants for Malaysia’s maiden digital banking licenses. YTL Digital Capital is a 100% wholly owned subsidiary of YTLP. We gathered they will have to undergo a period of operational readiness that will be validated by BNM through an audit before they can commence operations. This process may take between 12-24 months.

HLIB’s VIEW

Positive. We are overall positive on the news, allowing YTLP to foray into the digital banking business. YTLP will be able to leverage onto SEA Limited’s capability and regional network, and concurrently extract synergistic benefits with YES communication. SEA’s Shopee platform is one of the largest e-commerce players with e-wallet services in Malaysia as well as within regional ASEAN. SEA has also received digital banking license in Singapore and Indonesia. We understand the initial capital investment for Malaysia’s new digital banking license is around RM100m (unimpaired by losses) during the “foundational phase” of 3-5 years and by the end of 5 years, the consortium needs to achieve a minimum amount of capital funds of RM300m (unimpaired by losses). We believe YTLP can easily fund the capital requirement (for their shareholding portion) with the recent completed RM3bn cash proceeds from the disposal of ElectraNet.

Forecast. We make no changes to our forecast as the investment is still at a preliminary stage.

Maintain BUY, TP: RM1.05. We uphold our BUY recommendation, with unchanged TP: RM1.05, based on 10% discount to SOP: RM1.16 as we believe the current valuation is relatively undemanding, while dividend yield may surprise on the upside.

Source: Hong Leong Investment Bank Research - 5 May 2022