BIMB Holding; Hold; RM4.00
Price Target: RM3.90; BIMB MK

BIMB Holdings Bhd (BIMB) has received Bank Negara Malaysia's (BNM) approval to start negotiations with Lembaga Tabung Haji (LTH) over the latter's 18.5% stake in Bank Islam Malaysia Bhd (Bank Islam). Bank Islam is BIMB’s main earnings driver, contributing c.80 % of the group’s pre-tax profit. BIMB has until 31 Dec to complete the negotiation.

BIMB is also in negotiation to acquire Dubai Financial Group’s 30.5% stake in Bank Islam. We expect the deal to be finalised by 30 June based on the deadline given by BNM.

The additional stakes to be acquired from LTH and Dubai Financial Group will essentially raise BIMB’s stake in Bank Islam to 100% from 51% currently. This would plug the minority interest leakages and boost BIMB’s earnings (by an incremental amount of approximately RM290m or 82% in FY14F, before accounting for acquisition costs). We have not imputed the funding options as there are no details. Assuming the deal is funded by equity, there would be EPS dilution.

Maintain HOLD on BIMB and RM3.90 TP.

Source: HwangDBS Research - 12 Jun 2013