Overall I believe disposal of non-core asset is the right decision. To most investors, the only attraction of HLI is the cash generating Yamaha franchise (including Vietnam's associate), and the ~RM1.6b cash earning low interest at Hong Leong Bank (RM400m for tile factory not considered)
The disposal proceeds is about RM0.24 per share. After deducting expenses, such as the 50% retrenchment cost at PJ plant and the RPGT, the leftover could be ~ in the order of 20 sen per share.
The test for HLI Board is whether they are willing to distribute the entire cash as special dividend. Clearly with their RM1.6b cash hoarding, HLI doesn't need the money. This will be a test of HLB's corporate governance.

Looking at PB, item 4.2 in Appendix shows the disposal is RM20m above NAV. So it's a premium.
However, given the lack of investment (the CAPEX of the entire group has been very modest over the years), the assets would have been heavily depreciated by now. The NAV figure is not very reliable.
Based on item 1 in Appendix, we know that lands, including Kanthan land and building, have been excluded from the disposal. The 3.2m sq feet freehold industrial land at Kanthan worth some money. The net book value is RM7.19m but was last revalued in 1990. I googled and found asking price for even leasehold industrial land there is RM31 psf. So the land is unlikely to be part of the disposal which is estimated at only RM79.5m
However, item 4.2 (e) mentions RPGT associated with Kanthan Land disposal. I'm confused what the RPGT is for. Maybe another piece of land is involved? Hope HLI could clarify.

From MD&A of the annual reports, we know the fibre cement business has been struggling even before the pandemic.
However very little info has been shared. Instead of reporting the performance of each business separately, in the past the management chose to aggregate fibre cement with other businesses when providing revenue breakdown. Fibre cement was parked under industrial products up to 2019, and grouped with marine from 2020 onwards. No segmental profits/losses had been disclosed.
But during the change of grouping, it can be deduced the fibre cement revenue in 2019 was RM224m - RM46m (marine revenue) = RM177m.
Lets assume the latest annual revenue was RM200m. Given the projected disposal price was about RM79.5m, the disposal is valued at only 0.4X revenue, which is rather low (likely the business has incurred losses in recent years).

ROE and P/B relationship can reveal the extent of bank premium/discount.
Public Bank still enjoys the highest P/B multiple, as it's the leader in ROE, and also in key indicators like cost to income ratio, gross impairment loan ratio, loan loss coverage ratio.

The hope is this deleveraging process may come to an end. RHB CET-1 ratio has increased from 10.4% as of 2012 to 16.9% in 2022. Any further increase is unlikely.
So RHB has started to give back more dividends to shareholders (since it cannot invest the excess capital in a profitable way, by earning above its cost of equity)
So hopefully, barring any disaster in Malaysian economy, the next 10 years will be better.

But RHB is not alone. In fact, Public Bank has also performed poorly over the last decade as compared to the previous decade.
Based to Public Bank annual reports, net return on equity has declined from 24.1% in 2012 to 12.8% in 2022. As a result, price to book multiple has declined from 3.2X to 1.7X.

However, over the same 10-year period, return on average assets is almost unchanged, which is 1.9% in 2012, versus 1.8% in 2022 (so is return on risk weighted assets). Decline in profitability is mostly due to reduced leverage.

In RHB case, net profit to shareholders (the numerator) has actually increased from RM1.8b 2012 to 2.7b in 2022. However, shareholders’ equity (the denominator) has increased even more, from RM15b in 2012 to RM29b in 2022. The result is ROE of 13.4% in 2012 has declined to 9.7% in 2022.
A ROE of 9.7% is below RHB's cost of equity. So the price to book ratio is less than 1 time (currently below 0.8X)

ROE = net profit to shareholders/ average shareholders’ equity. As regulators demand more capital, the equity (denominator) increases, lowering the ROE which is a measure of profitability.
As ROE declines, price to book multiple also declines. Lower P/B leads to lower share price.

Since the introduction of Basel 3, a few years after the Global Financial Crisis, banks everywhere are required to hold more capital to reduce the risk of bank bailouts.
European banks were badly hit (they also had other problems). But Malaysian banks are not immune.
The direct impact can be seen on the lower Return on Equity (ROE) over the last decade.

I agree DRP is not fair to retail investors.
However, to put it in perspective, the five rounds of DRP by RHB total about RM0.38. At 10% discount, the “loss” to retail shareholders who did not subscribe is not more than 4 sen per share.
From the long run perspective, DRP is like a zero-sum game (ignoring fees), transferring wealth from a group of shareholders to another group. The trading activities by funds before and after DRP did not affect long term share price.
Yes, DRP is dilutive on per share basis. So are the effects of right issue, share distribution and employee share grants.
But DRP has very minimal to no impact on total return basis (i.e. after adding up all the dividends and extra shares gained from DRP, share distribution etc).
There are other factors responsible for the long-term share price under performance (again, measured on total return basis, not per share basis).

As mentioned before, if sharehodlers have to subscribe to DRP in order not to get diluted, the dividend yield is not 7.5%.
The effective dividend yield is (RM0.40 - RM0.10)/ RM5.31 = 5.6%

Shareholders can vote no to DRP during AGM.
But it is hard to succeed since the resolution is supported by the substantial shareholders.
In fact, the latest AGM outcome showed the DRP resolution was supported by more than 99.9% of the votes!
In terms of numbers, 1,723 shareholders voted in favor versus 201 against. Almost 9 to 1.
Some probably have voted yes despite not subscribing to the DRP and get diluted!

DRP is not friendly to small investors considering the cost (RM10 stamp duty), odd lots, and most importantly the trouble (before the e-DRP days, where one must rush to post office after receiving the form very close to deadline).

So DRP ends up being a transfer of wealth from small investors to bigger ones, who enjoy up to 10% discount.

Looking at past 5 rounds of DRP by RHB, the DRP subscription rate run from 85.96% to 87.65%. So about 87% has taken advantage of the 13% who did not subscribe.

Based on the analysis of shareholding as of 28-Feb-2023 (Annual Report page 196), 96.42% of the shareholding is held by investors owning more than 100,000 shares.

Given the latest round of DRP subscription was 87.02%, it means even some of the reasonably well-off investors owning more than 100k did not subscribe. I’m sure majority of the smaller investors owning less than 100k just gave up and received cash dividends instead, thereby subsidizing substantial shareholders EPF, KWAP and OSK.

How funny that i Capital describes its NAV discount as "transitory"!
The Fed first described inflation as "transitory" in early 2021. But the Fed abandoned the term before year end after realizing that it was plainly wrong.
Now i Capital picked up the word "transitory" to describe its NAV discount, which has been widening for more than a decade. "Transitory" over the time scale of a century?
The discount will only be "mean-reverting" when either iCAP is forced to return hoarded cash to unit holders, or the Board is voted out in the next AGM.

As for long term share price consideration, it's only fair to look at total return. Need to correct for the effects of dividend, DRP, bonus etc.

To illustrate the point, it's like we wouldn't say QL share price is "only" RM5 after more than 20 years of listing while ignoring the bonus issues along the way.

First, the recent weakness of RHB share price is not related to DRP. The charts of non-DRP banks like AMMB, Hong Leong Bank, Public Bank also show similar downward trend.

I agree DRP is dilutive (so it bonus issue). But DRP is worse for small investors. It's often a dilemma. Subscribing DRP with RM10 stamp duty and ending up with odd lots in order to "take advantage" of the up to 10% discount; or forgoing DRP and get diluted with funds such as EPF taking advantage of the discount.

Given that existing shareholders have to subscribe to DRP if they want to avoid dilution, it's more appropriate to measure the dividend yield after correcting for the DRP effects.

This means RHB's FY2022 dividend is only (25 sen - 5 sen) + (15sen - 5 sen) = 30sen.
The effective dividend yield at current share price is 0.30/5.29 = 5.7%. Still good, but not exceptional.

Maybank, after correcting for DRP effect, has a dividend yield of (0.30 + 0.28 - 0.07)/8.62 = 5.9%, which is even higher.

Of course, dividend yield is not the only consideration. Payout ratio, ROE, growth are also important.

Well managed MNCs such as Allianz and Nestle don't engage in bonus issue gimmick.
If RM14 is considered expensive, does it mean Borneo Oil at 1.5 sen is very cheap?

5-10 years to achieve profitability in takaful. Is it because it takes time to build scale?
Could Allianz leverage on its existing general insurance distribution channels, and thereby shorten the time to profitability?
It can use existing franchise at car dealers to offer both conventional and takaful products. It may retain Muslim customers who may be attracted to takaful. This helps to defend the overall market share in the long run.

You said takaful takaful will be more expensive (to policyholder) and less profitable (to insurer).
I don't understand. Unless the scale is too small (fixed cost spread over fewer policy holders), otherwise wouldn't more expensive products boost insurers' bottomline?

AIA has become less American after AIG disposal.
The company is incorporated in HK. It has a HK Chairman and Singaporean CEO. Yes, many American funds like Vanguard, Blackrock and Capital Group are counted as shareholders. But AIA's shareholding is diverse, just like HSBC. It will be hard to get the US government to lobby on its behalf in the future.

Will a general takaful license nicely complement Allianz' general insurance business?
As far as I know there are only 4 players - Etiqa General, Syarikat Takaful Am, Takaful Ikhlas General, and Zurich General Takaful.
But it's probably difficult to acquire an existing player.
Shouldn't BNM issue more licenses to encourage competitions?
My impression is the sector is not only fast growing and but is also lucrative. For example, based on product brochure available on STMB last year, wakalah fee for its fire insurance was listed as 55%, and PA at 60%.

I usually check the forumer's background when reading such comments. Our friend has joined i3 since 2017 but has only posted 3 comments so far.

Looking back, when AIA acquired ING Malaysia in 2012, the latter ranked number 3 then (Today Allianz is number 4 in life and 1 in general). Not sure how AIA got an exemption from the ownership rule which was introduced in 2009.
https://www.aia.com/content/dam/group-wise/en/docs/press-release/2012/aia-group-press-release-20121218-en.pdf.coredownload.inline.pdf
How likely will such exemption be granted today?
And could Allianz just dispose one rather than both businesses (few buyers will be both capable and interested to acquire both)

There could be a scenario for a MNC to team up with EPF to acquire Allianz Malaysia (assume, for whatever reason the parent is willing to sell, which I have absolutely no idea).
With its 1 trillion asset, EPF certainly will have the resources to take up 30% of Allianz Malaysia. There could also be future synergy of banca partnership with EPF controlled banks like RHB and MBSB.
However I doubt EPF will pay a premium for such acquisition given it can currently buy Allianz from the open market. If EPF is out, I can't think of any other local entities.

What are the chances for Allianz parent to dispose Allianz Malaysia? If that happens, minority shareholders will get a Mandatory General Offer. However how to circumvent 30% local ownership rule given that any buyer is likely to be another large MNC?

What about the chances for Allianz Malaysia paying a premium to acquire a competitor? But given Allianz doesn't have the necessary capital to mount a meaningful acquisition (since dividend payout has increased), it will require capital injection and shareholders' votes, not to mention regulatory approval too, which are complicated.

Could we therefore deduce that any M&A involving Allianz is very unlikely?

I wonder was your chart adjusted for dividend? RHB paid 40sen in the last year. An adjusted 1-year chart shows it's still trading within the range of ~5.2 to ~5.55, but an unadjusted chart shows the support at ~5.45 has been broken. But I'm not a technical person either. Let's hear from the experts.

UP received approval from Bursa exempting Q4 report submission, as long as they can publish Annual Report within 2 months as demanded for quarterly reports.
Look from another angle, how many companies in Bursa is able to publish Annual Report within 2 months. Among others, audited financial statements have to be ready. Bursa as a listed company itself sometimes made it within 2 months. At other times it exceeded by a few days. UP is always within 2 months.
From UP perspective, not submitting unnecessary QR means reducing administrative burden, which improves efficiency and is in line with their way of doing business.
From shareholders stand point, it's cumbersome to work out the numbers ourselves. I don't like it either. But all necessary info is already in the annual reports.
I suspect UP wants to only attract long term shareholders and discourage short term investors who are more concerned about numbers from quarter to quarter.

Some Muslim customers prefer Syariah compliant products

The government promotes Islamic finance. The growth potential can be inferred from historical growth rate. Allianz quarterly presentations contain general insurance vs general takaful growth data.

@dumbMoney, you're absolutely right. Shareholders have to defend their own interests by voting. Good to hear the case mentioned by Just88. The message should reach out to more of them.

The takaful industry has been growing faster than conventional insurance. I believe takaful players will continue to grow faster in the next few years. Allianz does not have a takaful license.
However Allianz is a good company with growing dividend and valuation not expensive. Being a foreign controlled company also has the advantage that parent in Germany has the same interest as us minorities to repatriate excess cash for better opportunities elsewhere through dividends.

Fund managers who dare to buy into this value trap would have been fired long ago.
The stigma with ICAP means no fund manager will want to the name of ICAP to appear on their stock portfolios, which they must publish to unit holders bi-annually. Why should fund manager take the career risk?
Short of COL mustering enough votes to kick out the board, buyers of ICAP can only hope for other unsuspecting retail investors to buy their tickets!

I'm not sure about other takaful players. But the 40% PNB owned GLC Maybank is the largest player, and is certainly competitive and nowhere near bankrupt.

Our of its 9 billion takaful & insurance revenue in 2022, takaful contributed 40% and conventional another 60%. If takaful player like Maybank is uncompetitive and only depends on government's handout, how could it grab its 60% conventional insurance business?

As for efficiency, which metric do you look at? One of the most important metric should be capital return efficiency. Based on latest quarter, Syarikat Takaful annualized ROE is 25.6%, beating every other insurance companies that I track.

I don't disagree that the takaful industry get a lift due to government's promotion of Islamic finance, and that Syarikat Takaful share price performance is miserable. But claiming that they cannot survive without government aid should be at least backed up by some data.

STMKB may wish to become a monopoly. Except that it only has just over 20% market shares in both Family and General Takaful!
Maybank Etiqa is probably bigger.
Your dissatisfaction is probably to do with promotion of takaful industry at the expense conventional insurance? STMKB is just one of the many players in the Takaful space.

Refer Takaful QR.
Shareholders' equity as of 2022 was RM1,986m under MFRS4, restated to RM1,347m under MRFS 17, i.e. 32% decline.
However, by 31 Mar 2023, shareholders' equity has increased to RM1,469m. A 9% increase in one quarter! The growth is impressive.

A large order at market closing bought up to 3.38. Will be interesting to see how the QR is like.

Share price continued to inch up today. All analyst reports are positive. My guess is the dividend in Q1 has contributed to buying interest. It would be interesting to see if EPF will buy again.

I do not have a view on this stock. However, investors beware that people making bullish or bearish comments could be either affected by their own bias, or worse, have a financial self-interest in their hope to influence other unsuspecting forumers.

Comments usually appear in abundance when stock price is tanking or shooting over the roof. At other time it’s very quiet.

But making a price prediction without backing up with data or fact is practically useless

Also take note FPI is one of the Bursa approved stocks for short selling.
https://www.bursamalaysia.com/trade/trading_resources/equities/regulated_short_selling

I agree changes in EV will not be a share price driver. GE is also priced below EV.
From the past experience of AIA, NBV growth is. I hope it can regain NBV growth.

I'm not sure how much Takaful's profit decline under IFRS17 has been priced in given the share price has almost halved from 2019 peak.
Besides, Takaful revenue growth has been impressive, including its general takaful. Allianz presentaiton shows that while in 3M23 AGIC GWP grew at 4.5%, the Takaful industry grew at 19.9%. While life insurance may be safe from takaful, I wonder whether it has become a trend in GI where Muslim clients switching to takaful.
The profile of Takaful retail shareholders could also be different from Allianz. But EPF is important shareholders in both. I'm puzzled why PEF started to dispose Allianz as recently as last week.

In my view, increased dividend is certainly an attraction for Allianz, and it has been flagged so in the annual report. It provides greater certainly to investors who value stable income over capital appreciation.

In the latest report, RHB put the valuation at 0.9X P/B for general insurance + 0.9X EV for life.
RHB quoted RM3.6b for EV based on management guidance, and put the GI equity value at RM2,405m.
Divided by 346mil shares on fully diluted basis.

Kenanga values it at 0.7X P/B for GI + 0.8X for EV.
Kenanga assigns RM3,516.2m to EV (not sure how it could be so precise), and GI book value is RM3404.9m (which is very different from RHB)

Profit will certainly decline, and by a large margin. The management has provided guidance last year. Whether share price is up or down depends on whether the coming "bad result" is better or worse than expected.

Why are there no more core profits under IFRS17? Are all fair value gains/ losses reported under OCI now?

OK, slide 29 shows that for life, CSM release is RM95m. So CSM release is purely for life?

For 3M23, Group PBT is RM232.3m, where GI contributes RM139.8m, and life contributes RM96.5m (slide #9).
CSM release for 3M23 is RM95m (slide 13)
Given that CSM is pre-tax, it should be compared against (IFRS17) PBT right?

Of the RM95m CSM release, any idea how much is from life, and how much is from GI?
What are the other sources of PBT? Investment return?

But one bright spot is they annouce DPS of 31.5sen (37.8 sen for ICPS). Didn't expect that in first quarter.
Earlier management mentions positive dividend trajectory in the annual report.
While it takes time to learn all these new concepts, one thing very simple and real is dividend.
I just hope that higher dividend does not mean NBV stops growing.

Just to be clear, you mean the NBV presented now is CSM, which is gross tax?

And to get the old NBV definition, we have to sum up New Business CSM + New Business RA, and deduct the tax?

Where can we get the NB CSM and RA info?

Slide #9 shows, based on MRFS17, NBV declined YoY from RM77.6m (3M22) to RM70.1m (3M23)
However, slide #26 shows that ANP increased YoY from RM147.1m (3M22) to RM163.4m (3M23)
NBV margin has declined. Slide #24 explains it's "due mainly to increase in acquisition expenses."

However, slide #27 shows that ILP has grown by 18.5%, whereas traditional products contracted at -23.5%.
Given ILP is said to have higher margin, rightfully margin should have expanded isn't it? The acquistion expenses must have increased quite substantially?

Before the result, I was expecting an increase in NBV since GE Malaysia and AIA Malaysia both registered NBV growth in 1Q23.

The new standard is quite a steep learning curve for me. Not just new concepts, but also have to learn how to compare against past standard!

Refer analyst presentation slide #7. Value of New Business (NBV) under MRFS4 is RM275m. Under MRFS 9/17 is RM300m.
I'm confused by the explanation "MFRS 9/17 view is before tax". So is the NBV of RM300m before or after tax?

@dragon328, good explanation! Thanks!

I agree that P/B approach is not satisfactory due to the arbitrary nature of book value. But valuation based on multiple allow easy comparison with the past. The other multiple appoaches like P/E, P/S, P/CF are equally challenging due to business volatility as discussed earlier.

You have a good point on current low utilization. Yes, valuation cannot reach replacement cost if the industry is still awash with idle capacity in the forseeable future. Replacement cost, at best, represents the ceiling of valuation at this moment.

Yeah, the ICPS is entitled for dividend, at 1:1 to each ordinary share.