The Premier of Sarawak since last year in April 2023 said that the Sarawak state will set up its own commercial bank and was in discussion with the federal government to take over a third strategic institution (after Bintulu Port and MAS Wing). 

On 13 April 2023, LTAT divested 4.8% shareholding of Affin Bank Berhad (ABB) to Sarawak at RM1.97 per share; a huge discount to ABB’s Net Asset Value of RM4.67 per share. The divestment amounted to RM221.7 million only. It was transacted at Price Book Ratio (PBR) of 0.4 times. To me, that transacted PBR value (0.4 times) raised eyebrows as it undervalued ABB and below LTAT’s investment cost. LTAT and Boustead Holdings (BHB) was and still in dire state to pare down its huge debt load of RM7 billion. The PBR transacted value simply did not make sense to me because : 

• From 2007 to 2022, precedent transactions involving other banks listed in Malaysia were completed within a range of PBRs of between 0.9 to 2.3 times. 

• In 2007, Bank of East Asia (BEA) invested in Affin Holdings at 1.3 times PBR 

• In 2014, LTAT, BHB and BEA subscribed in full their entitled Rights Shares at RM2.76 in Affin Holdings

• On 17 April 2023, Kenanga Investment Bank valued ABB between RM3.23 per share (Low range) and RM3.81 per share (High range) in Boustead Holdings Berhad Independent Adviser Circular to Shareholders

Basis of and Justification for the Price Book Ratio (PBR) : Precedent transactions involving the acquisition of financial institutions listed in Malaysia.  ( Malaysia Building Society Berhad Circular to Shareholders 12 July 2023 ; page 8 refer to 20/313)

Selected precedent transactions involving the acquisition of financial institutions listed in Malaysia PBRs ranging from 0.93 times to 2.35 times over the last 15 years from 2007 are as follows:

2018 Asian Finance Bank Berhad < MBSB 1.30 PBR times

2013 Hwang DBS < Affin Holdings 1.28 PBR times

2013 Bank Islam Malaysia Berhad < BIMB Holdings Berhad 1.88 PBR times

2012 OSK Investment Bank Berhad < RHB Capital Berhad 1.77 PBR times

2012 ECM Libra Investment Bank Berhad < Kenanga Investment Bank Berhad 1.27 PBR times

2011 RHB Capital Berhad < Aabar Investments 2.35 PBR times

2011 EON Capital Berhad < Hong Leong Bank Berhad 1.42 PBR times

2008 EON Capital Berhad < Primus Pacific Partners 2.21 PBR times

2008 RHB Capital Berhad < Abu Dhabi Commercial Bank 2.18 PBR times

2008 Bank Muamalat Malaysia Berhad < DRB-Hicom Berhad 2.15 PBR times

2007 Affin Holdings < Bank of East Asia 1.30 PBR times

2007 MIDF < PNB 0.93 PBR times

2007 RHB Capital Berhad Employees < Provident Fund of Malaysia 1.76 PBR times

2007 AMMB Holdings Berhad < Australia and New Zealand Banking Group 1.29 PBR times

In any mergers and acquisition deals, it is common for acquirers to pay a PREMIUM for a controlling stake or block shareholding. Therefore, I think any proposed deal in ABB this time should demand a fair and reasonable control premium from Sarawak for controlling stake and must be in the best interest of its stakeholders and not detrimental to the interest of the minority shareholders. This is, in addition, so that LTAT can maintain their commitment to providing steady dividend returns to military personnel and veterans who contribute to their retirement funds and safeguard their social welfare. Afterall, the immense wealth of the Sarawak state is also the wealth of Malaysia.  

“If Sarawak is prosperous and stable, Malaysia will also be prosperous and stable. Our mission is to become the Bavaria of Malaysia” - Tan Sri Abang Johari Tun Openg on 30 Jan 2024

- A minority shareholder of Affin Bank Berhad since 2021

Disclaimer : In the interest of full disclosure and transparency, I hold a vested interest in Affin Bank Berhad (ABB). The opinion and content above is based on my personal analysis and assessment, and it does not constitute investment advice and is NOT intended to encourage or promote the purchase of Affin Bank securities and financial instruments or derivatives. The opinion presented above is for informational purposes only.