Investment Highlights

• We maintain our BUY call on BIMB Holdings (BIMB) with a revised fair value to RM4.80/share (previously: RM4.90/share) based on a lower SOP valuation after incorporating the enlarged shares of BIMB following its announcement of issuing new shares for placement. No changes to our earnings estimate.

• BIMB has finally announced the key proposals to undertake the restructuring with Bank Islam eventually becoming the listed entity and the bank holding company. This confirms the long awaited news that has been rife in the market on the group’s restructuring plans.

• To facilitate the restructuring, BIMB will dispose of its 100.0% shareholdings in BIMB Securities Holdings (BIMB Sec Holdings), 49.0% in BIMB Securities and its subsidiaries (BIMB Sec) and its 100.0% stake in Syarikat Al Ijarah Sdn Bhd (SASB) to Bank Islam for a total of RM115.1mil. We deem the total purchase consideration at 1.0x P/BV as fair. It will be settled by Bank Islam utilizing internal funds.

• Coinciding with the proposed sale of subsidiaries, BIMB also announced that it will be placing out new shares to raise up to RM800mil. The issue price for the shares has yet to be determined. It will be at a discount of not more than 10.0% to the VWAP of BIMB shares for the 5 market days prior to the price fixing date. Assuming a 5.0% discount to the 5-day VWAP price of around RM4.30/share, the issue price works out to be RM4.09/share. This will enlarge the share capital of BIMB by 196mil new shares or 11.1% from RM1.76bil to RM1.96bil, with a marginal increase to BIMB’s BV/share.

• The proceeds raised from the placement of shares will be utilized to redeem a sukuk held by Lembaga Tabung Haji (LTH). The sukuk, issued at a discount on 12 Dec 2013, carries a profit rate of 6.25% in which BIMB has to incur an annual interest cost of RM52.8mil. The carrying value of the sukuk based on the 31 Dec 2018 audited financials of BIMB was RM844.2mil. With an estimated RM76.8mil accrual profits on the sukuk for 18 months (1 Jan 2019–30 June 2020), and a RM14mil redemption premium to be paid less a RM15mil scheduled coupon payment on 12 Dec 2019, the total redemption for the sukuk targeted on 30 June 2020 is estimated to be RM922.2mil. This will be funded by the proceeds raised from the private placement of shares with the balance settled by BIMB’s internal funds which we believe will be coming from dividends streamed to the holding company from its key subsidiaries.

Source: AmInvest Research - 12 Dec 2019