We trim our projected FY13-15 EPS for Maybank by 1-3% and DDM-based target price (COE of 10.9%; long-term growth of 5%) as we factor in a 2.7% increase in share base due to the issuance of new shares under its dividend reinvestment plan and ESOS. Maintain Outperform on Maybank, which could be catalysed by its swift expansion in Indonesia and benefits from the Economic Transformation Programme (ETP).

What Happened 
According to Bloomberg, Maybank is in talks with the ING Group to buy a 31% stake in TMB Bank, citing the Thai-language newspaper, Kao Hoon, as its source. Maybank will reportedly conclude the negotiation with ING by end-Aug and ING may target at least THB3 per share for its stake in TMB Bank.

What We Think 
From a strategic perspective, we are not surprised if Maybank is eyeing TMB Bank as Thailand is the missing link in its Asean business portfolio. However, pricing could be a major obstacle as Maybank has stated that it will observe price discipline in any M&A endeavour. Furthermore, we believe that it will seek to gain management control of the bank. Our Thai banking analyst thinks that the 31% stake in TMB Bank will be sold at not less than 2x book, translating into a price tag of at least RM3.72bn. Coupled with the assumption of a funding mix of 50% equity and 50% internal funds, the purchase of a 31% stake in TMB Bank could enhance Maybank's FY14 net profit by 0.5-0.9%. We see synergies in the areas of cross-selling between TMB Bank and Maybank's operations in the region and the transfer of Maybank's proven systems to TMB Bank.

What You Should 
Do Stay invested in Maybank given 1) its rapid growth in Indonesia, 2) the regional expansion of its investment banking business, and 3) the benefits from the ETP in Malaysia. The potential acquisition of TMB Bank could also be slightly EPS accretive.

Source: CIMB Daybreak - 05 July 2013, Full PDF Report