KEY INVESTMENT HIGHLIGHTS

• Public Bank acquiring a 44.15% stake in LPI. This will trigger a MGO
• Offer price is unattractive - at a discount to current market price
• Still fundamentally sound with good dividend yield. Offer price is not a reflection of its fundamentals
• Forecasts unchanged
• Maintain BUY | Unchanged TP of RM14.52 | based on an unchanged FY25F P/BV of 2.42x

Acquiring a stake in LPI. It was announced yesterday that Public Bank ("PBB") will acquire 175,896,000 LPI Shares held by the estate of the late Tan Sri Dato' Sri Dr. Teh Hong Piow ("estate") and Consolidated Teh Holdings Sdn Bhd ("Conteh"), representing a total 44.15% equity interest in LPI, for a total cash consideration of RM1.72b or RM9.80 per share.

For context, the estate and Conteh held 1.41% and 42.74% stake respectively. This will trigger a MGO to acquire all the remaining LPI Shares not already held by the group and persons acting in concert for a cash offer price of RM9.80 per Share.

Steep discount to market price. Based on its closing price prior to its trading suspension and 5-day VWAP of RM13.00 and RM12.84 respectively, the purchase and offer price by PBB is a discount of 24.6% and 23.7% respectively. The offer price implies a P/BV of 1.71x, which is a discount from its current P/BV of 2.3x.

Minorities unlikely to be attracted. There is potential for synergies with PBB. However, given the discount, we believe that the MGO will not likely see any interest from the remaining shareholders, especially as the current market price provides a more attractive avenue for minority investors looking to exit. Public Bank intends to maintain the listing of LPI.

Forecasts unchanged. We make no changes to the earnings forecast.

Key downside risks. (1) Weak investment result, (2) Ramp up in claims, (3) Weaker GWP growth.

Maintain BUY call: Unchanged GGM-TP of RM 14.52. The TP is based on an unchanged FY25F P/BV of 2.42x. LPI is still fundamentally sound with good dividend yields. We do not see the offer price as a reflection of its fundamentals.

(GGM assumptions: FY25F ROE of 15.4%, LTG of 4.0% & COE of 8.7%)

Source: MIDF Research - 11 Oct 2024