- We maintain our HOLD rating on Malayan Banking Bhd (Maybank) with an unchanged fair value of RM9.40/share. This is based on an ROE of 12.6% for FY15F, leading to an unchanged fair P/BV of 1.6x.

- Malayan Banking Bhd’s (Maybank) 78.98%-owned Indonesian subsidiary, PT Bank Internasional Indonesia Tbk’s (BII) has announced details of its rights issue over the weekend.

- The company announced that shareholders have approved its plan to conduct a rights issue (Rights Issue VII) to its existing shareholders, to raise approximately Rp1.5 trillion (about USD123mil or RM405mil) of Tier 1 capital, at the EGM of BII on 28 November 2014.

- The Rights Issue VII entails the issuance of 6,774,684,073 new ordinary shares on the basis of one (1) new ordinary Share Class D for every nine (9) existing shares which are recorded in BII’s shareholders’ list on 10 December 2014 at 4pm with nominal value of Rp 22.50 and at an offer price of Rp 221/share.

- Based on September 2014, the proforma capital adequacy ratio after rights issue will improve from 14.17% to 15.55%. The company said the rights issue is to support business expansion.

- BII’s rights issue is a surprise to us. Nevertheless, based on Maybank’s stake of 78.98%, we estimate that Maybank will need to set aside USD98mil, or RM320mil to subscribe for the rights issue.

- We believe there is also ongoing unresolved capital uncertainty for the possible incorporation of its Singapore operations. All in, the news reinforces our reservations on Maybank. Maintain HOLD.

Source: AmeSecurities