- We maintain HOLD on RHB Capital Bhd (RHB Cap), with a lower fair value of RM5.90/share (previously RM6.00/share).

- Our fair value is based on an unchanged FY16F ROE of 9.2% for the new RHB Bank which will take over RHB Cap’s listing status. This leads to an unchanged fair P/BV of 0.8x, and an unchanged fair value of RM4.50/RHB Bank share.

- We now estimate that each RHB Cap share is entitled to 1.28 (previously 1.31) RHB Bank share following the proposed restructuring. Thus, apportioning our fair value accordingly for RHB Bank means a new fair value of RM5.90/share for FY16F (previously RM6.00/share) for every RHB Cap share held currently.

- RHB Cap has just announced the issue price and the entitlement basis for the its proposed rights issue have been fixed at RM4.82 per rights share on the basis of one (1) rights Share for every five (5) existing RHB Cap shares held by the entitled shareholders of RHB Cap as at the entitlement date to be determined and announced later.

- To recap, we had earlier assumed the rights shares to be issued on a 1-for-6 basis. This was based on an illustrative issue price of RM5.60 per rights share and illustrative number of rights shares to be issued of approximately 431.4mil rights shares, based on the company’s indications in its circular. Based on the latest announcement, we have modified our earnings model accordingly.

- The company said the issue price for the rights shares represents a discount of approximately 20.3% to the theoretical ex-rights price (TERP) of RHB Cap shares of RM6.05 based on the five (5)-day volume weighted average market price of RHB Cap shares up to and including 4 September 2015 of approximately RM6.29 (5- Day VWAP).

- We maintain HOLD.

Source: AmeSecurities Research - 8 Sep 2015