- We maintain BUY on DRB-HIcom Bhd, with a fair value of RM3.65/share – a 15% discount to our SOP value of RM4.31/share.
- DRB-Hicom and United Overseas Bank (Malaysia) Bhd (UOB) have struck a deal with the US’s Prudential Financial, Inc and Bank Simpanan Nasional (BSN) for the disposal of the entire interest in Uni.Asia Life Assurance Bhd (UAL) for RM518mil cash.
- Yesterday, DRB-Hicom announced that the potential buyer was a company that would be 70:30 owned by Prudential’s unit, The Prudential Insurance Company of America, and BSN, respectively. Prudential Financial is listed on the NYSE, with no affiliation to the UK’s Prudential plc.
- It was exactly a year ago to the day that DRB-Hicom had announced that BNM did not object in-principle to the group starting talks with certain interested parties for its stakes in Uni.Asia General Insurance Bhd (UAG) and UAL.
- UAG and UAL are respectively 68.1% and 100% owned by Uni.Asia Capital Sdn Bhd (UAC), which is 51%-owned by Gadek (M) Bhd, which in turn, is fully-owned by DRBHicom. UOB holds the balance 49% of UAC. Effectively, DRB-Hicom owns 34.73% of UAG and 51% of UAL, respectively.
- DRB’s latest announcement was silent on its stake in UAG, the general insurance side of the JV with UOB.
- DRB-Hicom said UAC had yesterday submitted an application to BNM for the approval of the Minister of Finance to review the proposal for it to enter into an S&P with the proposed purchaser.
- The consideration represents ~2.2x of UAL’s estimated and adjusted shareholders fund of RM233mil as at 31 March 2013. This would be in line with recent insurer transactions involving valuations of between 1.8x and 2.4x.
- The price looks attractive give that UAL is one of the smaller life insurers in the country, though it does offer Prudential a foothold in the Malaysian market. Additionally, each of recent deals had involved life and general insurance businesses of considerable sizes.
- Separately, if the deal was approved, Prudential said UAL would sign a long-term bancassurance agreement withBSN to distribute its conventional life products via the latter’s 397 branches and 3,593 registered banking agents.
- UAL also has a strategic distribution alliance with DRBHicom’s associate Pos Malaysia Bhd for the distribution of life products via over 700 postal outlets. We believe this would continue.
Source: AmeSecurities
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EJ
Good or bad news????
2013-08-16 12:18