- The Edge reported that representatives of RHB Cap’s major shareholders, the Employees Provident Fund (EPF) and Aabar Investments (Aabar), are scheduled to meet in the next two weeks to discuss matters relating to a potential restructuring exercise which may include privatisation.

- The Edge reported that pricing and valuation are key, with Aabar’s support being crucial to the possible privatisation. The Edge cited a source as saying that the third largest shareholder, OSK Holdings Bhd (OSK), is open to the corporate restructuring plan.

- To recap, post the OSK Investment Bank (OSKIB) takeover by RHB Cap from OSK, we estimate EPF’s stake at 41.0%, Aabar’s at 21.9% and OSK at 9.8%. The OSKIB stake was acquired through the issuance of 245mil new RHB Cap shares priced at RM7.36, to OSK. We estimate that Aabar’s stake was thus diluted to 21.9% from 25.0%, while EPF’s stake was diluted to 41.0% from 45.0%.

- Aabar was reported to have paid RM10.80/share from Abu Dhabi Commercial Bank’s then 25% stake in RHB Cap in June 2011, which worked out to a P/BV of 2.3x. Abu Dhabi Commercial Bank first acquired the 25% stake in RHB Cap in May 2008 at RM7.20/share or a P/BV of 2.2x.

- Under the new Finance Service Act (FSA), which is expected to come into effect in 3H13, there is no limit on institutions’ stakes in banks, unlike the Banking and Financial Institutions Act 1989 (BAFIA) which imposes a limit of 20% on local banks. However, any acquisitions of stakes above 5% would still require regulatory approvals. .

- The Edge had earlier reported that there was a proposal to privatise RHB Cap, in an effort to create better value, with an option for RHB Bank to be re-listed later. The banking group could also be enlarged with the takeover of Malaysia Building Society Bhd (MBSB).

- We believe any proposal to privatise RHB Cap is likely to require concrete plans for relisting. We believe the main hurdle to possible privatisation is the viability of re-listing RHB Cap later. Nevertheless, the news on privatisation is positive for RHB Cap’s share price. The stock is currently trading at a cheap P/BV valuation of 1.3x FY13F. Maintain BUY.

Source: AmeSecurities