- We maintain our HOLD rating on Public Bank Bhd (PBB), with a revised fair value of RM21.00/share (vs. RM21.10/share previously).
- This is based on revised ROE of 19.3% (from 19.2%) for FY14F, a revised book value of RM7.82share (vs. RM7.86/share previously) and an unchanged fair P/BV of 2.7x.
- PBB has fixed its rights issue price at a larger discount of RM13.80/right share, vs. its earlier indicative price of RM14.20/right share for illustrative purposes.
- PBB said the issue price of RM13.80/right share represents a discount of approximately 33% to the theoretical ex-rights price of RM20.64/PBB share, which was calculated based on the five (5)-day volume weighted average market price of PBB shares up to and including 5 June 2014 of RM21.32 per PBB share.
- There is no change to the rights issue basis, which is 1-right-for-10-shares, leading to unchanged proposed total rights issue of 350.21mil shares.
- The total gross proceeds is revised to RM4,833mil, from an earlier indicative RM4,973mil.
- We forecast the group’s CET1 ratio at 10.38% (revised from 10.44%) by end-FY14, based on the latest final details – still a comfortably high level.
- Based on its latest 1QFY14 results, we estimate that the group’s proforma (including the rights issue) CET1 ratio for 1QFY14 to be at 10.83%, from the reported 8.53%.
- We remain positive on the rights issue, given that the rights issue’s price of RM13.80 is at a wider discount from the earlier indicative RM14.20. We maintain our view that the rights issue is digestible and positive, and removes any lingering concerns over capital for PBB.
- We estimate the ex-rights share price to be RM20.15 (see table in following page), based on current share price.
- The proposed rights issue is expected to be completed by 3Q14.
- Given recent strong share price appreciation, the stock is still trading at less than 15% upside to our fair value, which is our internal threshold for a buy rating. We maintain HOLD.
Source: AmeSecurities
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