Investment Highlights

• We maintain our BUY call on BIMB Holdings (BIMB) with an unchanged FV of RM5.40/share. Our FV is based on an FY19 ROE of 13.2%, leading to a P/BV of 1.7x. No change to our estimates for now.

• Recall that the press has reported on the group’s plans to undertake a restructuring with Bank Islam as the bank holding company. This will replace BIMB Holdings which is presently the holding company. We understand that there is no deadline to convert to a bank holding company structure similar to Affin and RHB.

• On 12 Dec 2018, the group made an early partial redemption of RM609.9mil (book value: RM500mil) on a sukuk murabahah (Sukuk) fully subscribed by Lembaga Tabung Haji (LTH). The sukuk, carrying a profit rate of 6.25% was issued at a discount on 12 Dec 2013 with a nominal value of RM1.66bil. Outstanding on the sukuk as of end-Sept 2018 was RM1.34bil. The partial settlement reduces the outstanding on the sukuk to circa RM800mil.

• News has been rife that the group could be undertaking a private placement of shares to raise up to RM630mil to settle the outstanding of the sukuk held by LTH and facilitate the reorganization of the group structure.

• Assuming a 10% discount on the new shares to be placed out, this could enlarge the share capital of BIMB Holdings from 1,693mil to 1,882mil shares.

• It has been reported that there is likely to be a swap between the shares of BIMB Holdings and Bank Islam. Each BIMB share will be entitled to 1.3 Bank Islam shares (1.3x) and 0.3 Syarikat Takaful Malaysia Keluarga (STM) share. Currently, BIMB holds a 59% stake in STM. The corporate exercise could see the entire 59% of STM shares distributed to BIMB shareholders. Hence, there will not be a deterioration of BIMB shareholders’ interest in STM. Eventually, all BIMB shareholders will become direct shareholders of Bank Islam and STM.

• The restructuring could see BIMB’s securities business parked under Bank Islam, but the latter will not hold any shares in STM directly.

• Based on our preliminary assessment in Exhibit 1, the current shareholders of BIMB will not be worse off by these changes that could be taking place in 2H19.

Source: AmInvest Research - 22 Jan 2019