- Recall that on 17 September 2015, RHB Capital (RHB Cap) announced that the regulators had prohibited Aabar Investments PJS (Aabar) from exercising its voting rights in respect of the shares held in RHB Cap in excess of 15% and RHB Cap is prohibited from issuing any further shares to Aabar in right of the shares which are in excess of 15% (Order). This is in relation to its proposed 517,696,286 rights issue, 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. The targeted gross proceeds from the rights is RM2.5bil.

- Further to this, RHB Cap had just announced that its Board wishes to highlight that the total number of rights shares to be issued is subject to further changes in order to give effect to the Order. In this regard, the Board will endeavour to make the necessary announcement(s) as the case may be.

- The company also reiterated that, in view of the above, the Entitlement Date for the Rights Issue has now been extended from 1 October 2015 to 23 November 2015 to allow time for the Board to engage with the relevant regulators and to deliberate and implement the Rights Issue in the most efficient manner, after considering the Order. In addition, the company said that the Board may, however, announce further extension(s) to the books closure date at a later date should the company require additional time to implement the Rights Issue.

- With this further recent announcement, we believe there is a possibility that the total number of rights to be issued by RHB Cap may be reduced by the portion that Aabar is not allowed to subscribe to, pending further consultations with regulators. This is about 6% of the total number of rights, or 33.1mil shares. To recap, Aabar currently holds 545.8mil shares or a 21.4% stake in RHB Cap. Aabar’s 21.4% stake would have allowed it to subscribe to 110.8mil shares in RHB Cap, but with this order, Aabar is now limited to 15% of the rights issue, or 77.7mil shares. There was no indication earlier of commitment by Aabar to subscribe to its portion of rights issue.

- Given the possibility of the rights being reduced by 6%, the gross proceeds may decrease accordingly by RM160.5mil, to RM2.33bil. The reduction is marginal in our view. However, the possible reduction in the number of rights shares is positive in the sense that it partly addresses concerns over a possible share overhang. HOLD.

Source: AmeSecurities Research - 7 Oct 2015