DRB (BUY)

Affin In-Talk for Muamalat Stake

• DRB-Hicom has received approval from Bank Negara Malaysia to commence negotiations with Affin Holdings to reduce its 70% stake in Bank Muamalat to 40%.
• We have ascribed 1.2x P/B for Bank Muamalat, contributing to RM1.4bn or RM0.72/share (before holding company discount of 20%) to DRB.
• DRB is likely to demand for higher valuation (vs HLIB’s) since Malaysia listed banks are traded at an average of 2.07x P/B, while Bank Islam is 1.58x.
• Maintain Buy with unchanged Target Price RM3.43

Source: Hong Leong Investment Bank Research - 17 August 2012