- DRB-Hicom yesterday announced that its insurance arm Uni.Asia Capital Sdn Bhd (UAC) had completed the disposal of its entire 68.1% stake in Uni.Asia General Insurance Bhd (UAG) to Liberty Seguros, Compania de Seguros y Reaseguros, S.A. (Liberty Seguros) for ~RM374.5mil cash.

- Based on the audited statements of the group for FY13, the disposal would result in a proforma gain of ~RM61.6mil. The cash consideration had been fully paid. This was part of DRB-Hicom group’s strategy to dispose of non-core activities.

- Liberty UK is an indirect subsidiary of Liberty Mutual Holding Company Inc. Incorporated in Spain, Liberty Seguros is an indirect subsidiary of Liberty UK and Europe Holdings Ltd, which is in turn an indirect subsidiary of Liberty Mutual Holding Co Inc.

- Following the Minister of Finance’s approval that was obtained via a letter dated 3 July 2014 from Bank Negara Malaysia, UAC had yesterday entered into the sale and purchase agreement with Liberty Seguros and the transaction was completed on the same day.

- DRB-Hicom holds a 51% stake in UAC, while United Overseas Bank (Malaysia) Bhd (UOB) owns the balance 49%. Effectively, DRB-Hicom owned 34.73% of UAG.

- The sale consideration, based on an implied valuation of RM550mil for 100% of UAG, was arrived at through a bidding process involving several parties and represented 1.6x UAG’s audited net assets of RM342.1mil as at 31 March 2013.

- This marks DRB-Hicom’s exit from the insurance business following UAC’s disposal of its entire interest in Uni.Asia Life Assurance Bhd (UAL) to the US’ Prudential Financial, Inc and Bank Simpanan Nasional (BSN) for RM518mil cash – the transaction of which was completed in early January.

- DRB-Hicom’s last major target involves cutting its 70% stake in Bank Muamalat to 40% pursuant to a Bank Negara Malaysia requirement. Khazanah Nasional Bhd holds the remaining 30%.

- We are neutral on the latest development. We maintain our numbers and reiterate our BUY call on DRB-Hicom, with an unchanged fair value of RM3.60/share – a 15% discount to our SOP value of RM4.25/share. 

Source: AmeSecurities