Posted by Tiago Gt > 2013-08-20 10:07 | Report Abuse

Bank Muamalat Malaysia courts merger, Bank Rakyat and MIDF among possible candidates


PETALING JAYA: Bank Muamalat Malaysia Bhd is said to be revisiting the idea of a merger, but this time possibly with a development financial institution (DFI), sources said.

Among the possible candidates are Bank Rakyat Malaysia Bhd and Malaysian Industrial Development Finance Bhd (MIDF), the sources added.

Bank Muamalat and Bank Islam Malaysia Bhd – ultimately owned by Lembaga Tabung Haji – are the only two standalone Islamic banks in the country licensed by Bank Negara.

DFIs, meanwhile, are specialised financial institutions established by the Government with the specific mandate to develop and promote key sectors that are considered of strategic importance.

DFIs include Bank Simpanan Nasional, Export-Import Bank of Malaysia Bhd, Small Medium Enterprise Development Bank Malaysia Bhd or SME Bank and Bank Pembangunan Malaysia Bhd as well as Bank Rakyat and MIDF.

To recap, the shareholders of Bank Muamalat had been in negotiations with Affin Holdings Bhd, but talks between the parties were called off at end-March.

It was reported that Affin had sought to acquire a portion of DRB-Hicom Bhd’s 70% stake in Bank Muamalat, but the deal fell through due to pricing issues. Talks between the parties had commenced in August last year. At that time, Affin had said that it expected to conclude the talks by the end of 2012.

DRB-Hicom, whose interests vary from ports to property development, had acquired the 70% block in Bank Muamalat in 2008 on the condition that it eventually reduced this to 40%.

It is learnt that Affin was looking to buy 30% of Bank Muamalat from DRB-Hicom.

Khazanah Nasional Bhd owns the remaining 30% of Bank Muamalat.

Affin’s withdrawal from the talks was seen as putting DRB-Hicom in a tight spot, given that it has to pare down its stake in accordance with Bank Negara regulations.

Industry players have said that the idea of a merger between Bank Muamalat and Bank Rakyat is an attractive proposition, given that both are Islamic concerns, with Bank Rakyat being the country’s largest Islamic cooperative bank.

Bank Rakyat, according to sources, is believed to have ambitions to grow its commercial banking segment and a clear path to this would be via a merger with an Islamic bank.

Industry observers have also noted that it has always been the aspiration of the central bank to create a mega Malaysian Islamic bank, which would cement the country’s status as the world’s largest sukuk market and hub for Islamic finance.

Bank Muamalat has had a tough time courting suitors over the past few years, having failed to strike a merger deal with Bank Islam Malaysia in 2011 and Bahrain-based Islamic lender Al Baraka Banking Group prior to that.

On the positive side, Bank Muamalat has worked to clean up its books and improve its returns over the last few years.

For the financial year (FY) ended March 31, 2013, Bank Muamalat posted a record pre-tax profit of RM236mil, with revenue rising close to 12% to nearly RM1bil. Its asset size stood at RM21.07bil.

The bank began operations in October 1999, with its combined assets and liabilities being brought over from the Islamic banking windows of the-then Bank Bumiputra Malaysia Bhd, Bank of Commerce (M) Bhd and BBMB Kewangan Bhd.

Bank Rakyat, meanwhile, has been enjoying good profitable growth over the years, breaching the RM1bil profitability mark in 2008. For FY2011, it made a profit before tax and zakat of RM2.02bil, with the bulk of its financing income coming from consumer banking.

For the first three months to March 31, 2013, its profit before tax and zakat was RM539.52mil.

Posted by Tiago Gt > 2013-08-20 10:09 | Report Abuse

LAST week, the FBM Kuala Lumpur KLCI (FBM KLCI) reversed consolidations over the past two weeks and went into a technical rebound, tracking the Tokyo and Hong Kong stock markets.

Heavyweight index-linked counters played pivotal roles in last week's technical rebounds. The FBM KLCI continued to stay above its support of 1,780 when it hit an intra-week high of 1,801.26 on Friday.

The FBM KLCI rebounded from an intra-week low of 1,777.87 on Monday before rebounding to an intra-week high of 1,801.26 on Wednesday, giving it an intra-week trading range of 23.89 points.

The Bursa posted a week-on-week gain of 8.92 points, or 0.50 per cent. Its Small Cap Index gained 363.05 points, or 2.36 per cent, to 15,738.34 while the FBM ACE Index also gained 264.87 points, or 5.08 per cent, to 5,483.79 on Friday.

In New York, share prices on Wall Street slipped into a consolidation last week. The Dow Jones Industrial Average closed lower at 15,081.47 points on Friday, with a loss of 344.04 points, or 2.23 per cent.

The tech stock-heavy Nasdaq Composite Index moved in tandem with the general market trend when it staged a technical pullback last week.

The Nasdaq Composite Index closed lower at 3,602.78 points, with a loss of 57.33 points, or 1.57 per cent.

On the home front, automotive giant DRB-HICOM Bhd staged a technical rebound, in tandem with rebounds on the local market last week. Its daily price trend closed at RM2.70 on Friday, giving it a week-on-week gain of 10 sen, or 3.85 per cent.

The following are the readings of some of the DRB-HICOM's technical indicators:-

Moving Averages: DRB-HICOM's daily price trended above all its 10-, 20-, 30-, 50-, 100- and 200-day moving averages last week.

Momentum Index: Its short-term momentum index stayed above the support of its neutral reference line last week.

On Balance Volume (OBV): The company's short-term OBV stayed above the support of its 10-day moving averages.

Relative Strength Index (RSI): DRB HICOM's 14-day RSI stayed above 50 per cent. In the meantime, its technical reading stood at 58.41 per cent last week.

Outlook

Judging from last week's market behaviour, key heavyweights had played pivotal roles in reversing the FBM KLCI's two-week consolidation into that of a technical rebound. Select second liners had even outperformed Main Market counters.

DRB-HICOM was one of these counters.

Chartwise, DRB-HICOM's monthly price trend staged a technical rebound after two-month consolidations last week.

That augurs well for its intermediate-term perspectives.

Its weekly price trend staged an overhead breakout of its intermediate-term resistance last week (ee DRB-HICOM's weekly price chart - A3:A4). The weekly prices continued to stay above its intermediate-term uptrend support (A1:A2).

In the meantime, DRB-HICOM's daily price trend staged an overhead breakout of its intermediate-term downtrend (See DRB-HICOM's daily price trend - B1:B2) on Friday. It stayed above its intermediate-term downtrend (B1:B2).

Its daily fast MACD (moving average convergence divergence) stayed above its daily slow MACD at the market close last week. Thus, it augurs well for its short- to intermediate-term perspectives.

As for the 14-day Relative Strength Index (RSI), it stood at 58.41 per cent on Friday. Its 14-week and 14-month RSIs, meanwhile, stood at 54.19 and 57.97 per cent, respectively.

Viewing the bullish technical breakout on its daily chart, DRB-HICOM's daily price trend is poised to stage a follow-through technical rebound and it is likely to re-challenge its immediate overhead resistance at between the RM2.75 to RM3.00 levels over its intermediate-term perspective next week.


Read more: DRB-HICOM poised for follow-through rebound http://www.btimes.com.my/Current_News/BTIMES/articles/SNLS1013/Article/#ixzz2cTHDHEN2

Posted by Tiago Gt > 2013-08-20 10:11 | Report Abuse

PETALING JAYA (Aug 19, 2013): Shares in DRB-Hicom Bhd shot up to one-month high at RM2.70 last Friday on expectation that the sale of the group's stake in a life insurance business will fetch RM264 million in cash.

This is based on DRB-Hicom's 51% share in Uni.Asia Life Assurance Bhd, which is being sold for RM518 million to a joint company owned by Prudential Insurance Company of America and Bank Simpanan Nasional Bhd.

"We are positive that DRB-Hicom is finally disposing UAL and we expect the disposal of the other 34.7% stake in Uni.Asia General (UAG) to follow soon,'' Hong Leong Investment Bank said in a report.

A clean exit from the insurance business would make DRB-Hicom a syariah-compliant counter.

This, according to the analyst at HLIB, could be a potential re-rating catalyst for the undervalued stock.

The disposal of UAL is part of DRB-Hicom's plan to raise as much as RM1.5 billion through disposal of non-core assets to reduce debts that stand at RM6.5 billion.

Public Investment Bank said the sale of its insurance business will unlock "hidden values" within the group. "The current share price is not reflecting the underlying value of sprawling assets within DRB-Hicom,'' it said.

Public IB is maintaining an 'outperform' call on DRB-Hicom with a target price of RM3.53, while Hong Leong IB has a 'buy' call with a target price of RM3.36.

Posted by Tiago Gt > 2013-08-20 10:17 | Report Abuse

Target RM2.84 (Long Term: Neutral)

Approval for DRB to negotiate a sale of UniAsia Life Insurance (UAL) to Prudential and Bank Simpanan Nasional for RM518m is in line with expectations at an estimated valuation of 2.24x P/BV. UAL has been up for sale for some time and is part of DRB's non-core disposal plans.

We raise our EPS by less than 1% for FY3/15 and FY3/16 to incorporate interest-cost savings from a paring of debt which compensate for lost contributions from UAL. Its NTA will rise marginally from the sale, which raises our target price, still based on 0.75x NTA, DRB's 10-year valuation average. Neutral maintained pending a crucial restructuring of Proton. We prefer Tan Chong.

What Happened
DRB has received Bank Negara's approval to begin negotiations for a sale of UAL for RM518m to Prudential Insurance Company of America and Bank Simpanan Nasional (BSN) on a 70:30 basis.

What We Think
DRB owns 51% of UAL and could receive RM264m from the sale. This is part of its non-core asset-disposal programme to raise RM1bn-1.5bn to pare down its debt which totals RM6.5bn. As highlighted before, the main issue with DRB is its too-high cost of debt at over 6% while Proton does not make enough money to pay for the RM2.4bn loan that DRB initially took to acquire the national car company. Valuations of UAL are in line with previous industry transactions at 2.24x NTA. UAL made RM32.6m in PBT last year and we forecast 10-15% PBT growth a year on the back of low penetration rates for the life-insurance industry. Although the industry has good prospects, UAL is not a major player and DRB's priority is to reduce debt and reap interest-cost savings, in our opinion.

What You Should Do
Although DRB has made progress in non-core asset disposals, there has been a lack of clear progress in the restructuring of Proton. Investors should stay sidelined until the direction is clear on this front. Meanwhile, downside should be limited as the stock continues to trade below NTA.