According  to  StarBiz  (quoting  Reuters),  Vietnam’s  central  bank,  the  State Bank of Vietnam (SBV), has given the green light to the Public Bank group to buy out the remaining 50% stake in VID Public Bank (VPB) for US$62.6m (approximately  RM228.35m)  from  Joint  Stock  Commercial  Bank  for Investment and Development of Vietnam (BIDV), in a submission made in Jul14. VPB, which is now a 100%-owned subsidiary of PBB, will be applying for  a  conversion  of  VPB  into  a  100%  foreign-owned  bank  in  Vietnam. (Source: StarBiz)

Comments:  We do not anticipate a significant impact on 2015-16E’s EPS. At  present,  PBB’s  associate  companies,  including  VPB,  contributes  about 0.1%  of  PBB’s  group  pre-tax  profit.  Meanwhile,  overseas  assets contribution  made  up  about  7.4%  of  PBB’s  2014  pre-tax  profit,  with  the Hong Kong market accounts for the bulk of it.

Based on PBB’s available debt facilities, we believe that the acquisition will be  funded  through  the  group’s  Medium  Term  Notes  Programmes.  This acquisition  is  not  expected  to  have  a  significant  bearing  on  the  group’s capital adequacy.

Maintain our BUY rating on Public Bank, TP at RM21.80, which is based on a 2.57x 2016 P/BV target. PBB remains a defensive bank due to its sound asset  quality  (lowest  gross  impaired  loan  ratio  of  0.65%),  established franchise  in  retail-banking  (No.  1  position)  and  well-capitalised  balance sheet.

Source: Affin Hwang Capital Research - 25 Mar 2015