- We maintain HOLD on RHB Capital Bhd (RHB Cap), with a slightly higher fair value of RM7.80/share (from RM7.70/share previously). Our fair value is based on a lower ROE of 11.0% (previously 11.2%) for the new RHB Bank which will take over RHB Cap’s listing status, as we have tweaked our forecasts to reflect the circular just recently released.

- The circular for shareholders’ EGM, which is set on 27 August 2015, is in relation to its proposed rights issue and internal restructuring exercise (proposed corporate exercise). There is no major change in the proposed corporate exercise.

- Based on the circular, we have changed our book value to RM5.16/share (from RM5.10/share) for RHB Bank. Our fair P/BV is unchanged at 1.2x, leading to a lower fair value of RM5.94/RHB Bank share (previously RM6.00share).

- Furthermore, we now estimate that each RHB Cap share is entitled to 1.31 (previously 1.29) RHB Bank share following the proposed restructuring. Thus, apportioning our fair value accordingly for RHB Bank means a fair value of RM7.80 (vs. RM7.70 previously) for every RHB Cap share held currently.

- The rights issue pricing and the eventual swap ratio from RHB Cap share to RHB Bank share, are expected to be finalised after the EGM.

- However, based on the circular, there are some marginal changes to the proposed rights issue’s illustrative price and number of shares. The illustrative pricing is now RM5.60 (previously RM5.70) while the number of rights shares is now 431.4mil (vs. 431.3mil previously).

- Otherwise, the targeted gross proceed is unchanged at RM2.4bil.

- Post the restructuring, RHB Bank’s issued shares are now stated at 3.968bil, which is a marginal change from 3.883bil previously in the April 2015 announcement.

- Thus, we estimate that, for every RHB Cap share, shareholders should now be entitled to 1.31 (previously 1.29) RHB Bank share, as RHB Bank shares will be distributed to RHB Capital shareholders on an entitlement basis post the rights issue.

- We have tweaked our forecasts to reflect the information in the circular. Maintain HOLD.

Source: AmeSecurities Research - 7 Aug 2015