Investment Highlights

• We maintain HOLD on Public Bank (PBB) with an unchanged fair value of RM4.60/share supported by ROE of 12.9% leading to FY24F P/BV of 1.6x. We made no changes to our earnings estimates and neutral 3-star ESG rating.

• PBB announced that its wholly-owned Public Investment Bank (PIVB) has entered into a sales and purchase agreement with RHB Bank’s 100%-owned RHB Investment Bank (RHBIB) to acquire the entire equity interest in RHB Securities Vietnam (RHBSVN). Total consideration for the acquisition was RM72.6il (VND374bil based on an exchange of RM1: VND5,155).

• The acquisition price is based on RHBSVN’s audited net assets of RM31.9mil (VND164.4bil) as of 31 December 2022. This translates into a P/BV of 2.3x which we deemed as a good disposal price by RHB Bank. The disposal will result in a one-off net gain of RM29.2mil to RHB Bank.

• Acquisition price will be adjusted in the event RHBSVN’s audited or unaudited net assets as at the completion date falls below VND156.2bil or 95% of its audited net assets as of 31 December 2022. Should the audited or unaudited net asset of RHBSVN as at the completion date decline to below VND148bil or 90% of its audited net assets as of 31 December 2022, PIVB is entitled to renegotiate the terms and even terminate the agreement.

• The proposed acquisition of the 100% stake in RHBSVN will be fully funded by PIVB’s internal funds and expected to be fully completed by 2Q24.

• RHBSVN does not have a significant market presence in Vietnam. For FYE2021/2022, RHBSVN recorded net losses after tax of VND6.6bil/VND7.6bil (RM1.3mil/RM1.5mil at RM1: VND5,155), attributed to higher operating expenses and stiff competition in the stockbroking industry.

• In view of the small ongoing losses after translating into domestic currency, the acquisition of RHBSVN is not expected to materially impact PBB’s FYE2024 earnings.

• The acquisition is seen as complementing PBB’s existing business in Vietnam, enabling the group to extend its financial services offerings to include securities trading. Recall, overseas operation accounted for 8% of the group’s 9MFYE2023 PBT.

• The stock is trading at a fair FY24F P/BV of 1.5x.

Source: AmInvest Research - 20 Feb 2024