Journey to Wealth
Malayan Banking - Unexpected placement of new shares HOLD
- We are maintaining our HOLD rating on Malayan Banking Bhd (Maybank), with a lower fair value of RM9.30/share (vs. RM9.50/share previously). This is based on a downgraded ROE of 14.0% (from 14.4%) for FY12F, which leads to lower fair P/BV of 1.9x (from 2.0x).
- In a surprising move, Maybank said it is proposing a private placement of up to 300mil new shares, with a potential upsize, to investors which will be identified.
- The indicative pricing is at RM8.80, based on a 3% discount to the weighted average market price of Maybank shares for the 5 market days up to 4 October 2012 of RM9.0757.
- Based on the indicative pricing, the gross proceeds is RM2.64bil. We understand the placement is partly for BASEL 3 capital purposes and for working capital. We understand that this is not in preparation for acquisition of Bank of Ayudhya in Thailand.
- The proposed share placement is a surprise to us, given that Maybank had previously reassured that its common equity ratio of 8.63% as at September 2012 was sufficient under BASEL 3.
- We believe this may be a pre-emptive move for a reduced dividend reinvestment plan ahead, particularly after it completes utilisation of its Section 108 which is likely by mid-2013.
- Assuming the new shares of 300mil is issued at RM8.80, our ROE is adjusted downwards by 0.4ppt FY12F to 14.0% (from 14.4% previously) and by -0.8ppt to 13.7% FY13F (from 14.5% previously). Thus, our fair P/BV is revised to 1.9x from 2.0x, yielding a new fair value of RM9.30 from RM9.50.
- The proforma common equity ratio is increased by 0.9ppt to 9.57% from 8.63% in September 2012.
- A possible acquisition of a 25% stake in Bank of Ayudhya is estimated to cost RM5bil, based on the current market price.
- The latest move reinforces our view that Maybank is likely to lower its dividend payout ratio ahead. We maintain our view that the dividend payout ratio will likely normalise to the official guidance of 40% to 60% post utilisation of Section 108 tax credit by 2013. We have assumed a dividend payout ratio of 58% for FY13F vs. 75% for FY12F. The latest share placement is marginally dilutive. We maintain HOLD on Maybank.
Source: AmeSecurities
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