INVESTMENT HIGHLIGHTS

• The Group’s subsidiary is divesting entire stake (68.55%) in WOM Finance for IDR673.8b (approx. RM229.1m).

• WOM Finance provides financing for new and used motorcycles in Indonesia.

• We are NEUTRAL on the news as the divestment will have no significant impact to Group’s bottom line or book value.

• For 9MFY16, we estimate WOM contributes only 2.9% to Maybank Indonesia’s PBT.

• WOM’s asset quality seems to be deteriorating with gross NPL ratio climbing 89 basis points to 3.84% as at 3QFY16. Hence, could be a positive move.

• Reward to the Group’s shareholders unlikely given sale is at Maybank Indonesia’s level.

• Maintain NEUTRAL with unchanged TP to RM8.10 based on PB multiple of 1.2x.

Subsidiary divesting a subsidiary. The Group announced yesterday that its subsidiary, Maybank Indonesia, is divesting its entire equity interest of 68.55% in WOM Finance. The divestment is for a total cash consideration of approximately IDR673.8b (approximately RM229.1m), plus the difference between the book value of WOM Finance as at end FY16 and end FY15 in proportion to Maybank Indonesia’s 68.55% stake. Completion is expected to occur by 1QFY17.

Provider of motorcycle financing. WOM Finance provides financing for new and used motorcycles, with the majority of consumer financing granted for well-established motorcycle brands. WOM Finance is listed on the Indonesia Stock Exchange. Maybank Indonesia’s first involvement with WOM Finance started in 2004.

NEUTRAL on the news but there is a positive. We are NEUTRAL on the proposed divestment of WOM Finance given that there is no significant impact to the Group’s bottom line or book value. We estimate that for 9MFY16, WOM Finance contributes only 2.9% to Maybank’s Indonesia’s PBT. The announcement stated that the rationale for the divestment is as part of Maybank Indonesia’s strategic initiative to maximise its capital use and streamline its customer segmentation. We note that WOM Finance’s asset quality seems to be on a deteriorating trend. Gross NPL ratio climbed by +89bps yoy to 3.84% as at 3QFY16. Hence, we believe that the divestment could have a positive to Maybank Indonesia.

Additional reward unlikely. We do not believe that the expected cash consideration will be distributed to shareholders as the proposed divestment is at Maybank Indonesia’s level. Therefore, we make no adjustment to our dividend expectations.

FORECAST

We make no change to our forecast.

VALUATION AND RECOMMENDATION

All-in-all, we are NEUTRAL on the proposed divestment as we do not believe that there will be a significant impact. For the Group going forward, we expect that NIM will continue to be under pressure and loans growth may remain sluggish in FY17. Therefore, we are maintaining our NEUTRAL call on the stock. Our unchanged TP of RM8.10 is based on PB multiple of 1.2x.

Source: MIDF Research - 13 Jan 2017