News

Maybank to sell listed Maybank ATR Kim Eng Financial Corp for 3.19bn Pesos or RM237.5m to Mazy’s Capital Inc (owned by a group of local investors led by businessman Alfredo M. Yao).

Maybank ATR said the disposal will pave the way for closer cooperation between the two remaining Maybank subsidiaries in generating revenue and streamlining management.

The disposal will leave Mayabnk with Maybank Philippines Inc and Maybank ATR Kim Eng Capital Partners Inc (MATRKECP) in the country. Assets and liabilities of the dispose listed entity (including Asian Life and General Assurance Corp and ATR Kim Eng Land Inc) will be consolidated into MATRKECP.

Comments

We believe this is a good move given that it is selling the listed shell while retaining existing business units.

The disposal will enable the group to recoup some of its investment when it acquired Kim Eng group in Singapore.

Meanwhile, retaining the business units will support its aspiration to become a regional banking group given that Philippines is an important part of the ASEAN block.

Financial, given the absence of announcement from Maybank, we believe it will have minimal impact on earnings but could boost its book value (albeit marginally given that the whole disposal consideration is only worth circa 2.7 sen to the group).

Risks

Unexpected jump in impaired loans, lower than expected loan growth and significant slowdown in capital market.

Forecasts

Unchanged.

Rating

BUY

Positives – Improving domestic operations and expanding regional footprint, new divisions to better address competition and customer centric and new IB outfit gaining traction. DRP provides downside protection while giving additional boost (from the discount pricing of DRP) to industry leading dividend yield.

Negatives – DRP will drag ROE, recent deterioration in asset quality and exposure to Indonesia (fortunately it is less than 10% of profit).

Valuation

Target price maintained at RM11.36 based on Gordon Growth with ROE of 15.0% and WACC of 9.7%.

Source:Hong Leong Investment Bank Research - 30 Sep 2013