- The local press reported that Mega Financial Holding Co Ltd (Mega Financial) Taiwan is in talks to buy RHB Bank Bhd, the 100%-owned banking subsidiary of RHB Capital (RHB Cap), and/or RHB Cap’s Indonesian unit PT Bank Mestika Dharma (Bank Mestika).

- This is based on news report in Taiwan that Mega Financial is looking to gain access to the Middle East market and to have a better understanding of Islamic finance.

- Nevertheless, Mega Financial was reported in the local press to have submitted a statement to the Taiwanese stock exchange that it did not have plans to buy into RHB Capital currently.

- RHB Cap also denied that it is in discussions with Mega Financial to sell a stake in its banking unit, RHB Bank.

- Despite the denial, the local report said that RHB Cap’s major shareholders Employees Provident Fund (EPF), which owns a 41% stake, and Aabar Investments PJS (Aabar), which owns a 22% stake in RHB Cap, may be potential sellers of RHB Cap to Mega Financial.

- Aabar Investments’ stake was reported to be acquired at RM10.80/share.

- The M&A speculation is positive for share price, given that this may give rise to hope of better earnings with the entrance of a new strategic shareholder. However, a stake of less than 33% means there is no general offer (GO) for minority shareholders.

- We maintain HOLD. 

Source: AmeSecurities