What’s New

Disposes of WOM Finance for an estimated amount of RM250m. Maybank (MAY) announced the disposal of its 68.55% stake (through Maybank Indonesia) in Wahana Ottomitra Multiartha Tbk (WOM Finance) for an estimated amount of RM250m (RM229.08m + estimated difference in book value from 31 Dec 2015 to 31 Dec 2016). Based on the Sep 2016 book value, the estimated purchase consideration values WOM Finance at 1.3x BV.

In line with optimisation initiatives. In the announcement, MAY stated that the disposal was in line with Maybank Indonesia’s initiatives to optimise capital and resources (through streamlining of customer segments). WOM Finance mainly provides financing for new and used motorcycles. The disposal is slated for completion in 1Q17, but Maybank Indonesia expects continued collaboration with WOM Finance in the future.

Minimal impact to MAY. Based on our estimates, WOM Finance contributes 4% to Maybank Indonesia’s PBT. Meanwhile, Maybank Indonesia contributes less than 10% to MAY’s PBT. Hence, in the greater scheme of things, the earnings impact of the disposal to MAY is minimal. In our view, Maybank Indonesia is going through a period of consolidation as the bank attempts to look for areas to optimise its operations and balance sheet.

Maintain HOLD, RM7.50 TP. While its dividend yield remains attractive, asset quality would remain a key risk for MAY in our view, thus limiting any share price upside. Its earnings remains vulnerable to weakness in the oil and gas sector (its exposure stands at 4.31%).

Source: Alliance Research - 13 Jan 2017