The weekend Edge shed more light regarding Maybank’s recent disposal of a 9% stake in BII, identifying UBS as the purchaser and the transacted price of IDR355/share. We estimate Maybank’s average cost to be close to the sale price. Separately, while credit cost may rise in 2Q due to MAE’s recent loan default, this would be mitigated by the low 1Q charge off rate. Fair value of MYR11.40 and Buy call retained.

- Further details on BII selldown. Recall that on 20 Jun, Maybank announced that it had disposed off a 9% stake in BII (i.e. from 97.3% to 88.3%) to a third party investor as part of Maybank’s efforts to meet the 20% public float requirement by the authorities. The identity of the purchaser and the price at which the BII shares were sold for, however, were not disclosed back then. Over the weekend, The Edge provided more details regarding the transaction. According to the paper, the BII stake was sold to UBS at IDR355/share.  

- No significant impact from sale for now. At face value, it appears that Maybank would have made a loss from the sale, if comparing the price to the initial cost and tender offer price of IDR510/share. However, after taking into account: 1) The discount from some of the vendors; 2) Subsequent rights issue by BII in 2010; and 3) Impairment charge in FY09, we estimate the average cost would have fallen to IDR344/share, i.e. close to the sale price. The reduction in stake held in BII is not expected to impact group earnings too significantly as well, given that BII only contributed around 7% to group PBT in 2012.

- Higher credit cost in 2Q? The Edge also reported on the delay of the klia2 project, with the baggage handling system cited as among the hiccups faced. We believe this portion of the project relates to Malaysian AE Models (MAE) based on MAE’s announcement back in Mar ’12 that it was awarded a sub-contract works package worth MYR61.9m for the baggage handling system at klia2. Potentially, this could have led to its cash flow problems, resulting in the recent default of a term loan facility. MAE’s main bankers are Maybank, RHB and HSBC and total borrowings were MYR450m as at 28 Feb 2013. At  this stage, it is unclear as to Maybank’s exposure to MAE and potential loan provisioning required. In mitigation, Maybank’s 1Q13 loan impairment provision stood at a low MYR85m, i.e. just 8.5% of our MYR1bn full-year forecast.  

- Investment case. No change to our fair value of MYR11.40, which is based on target CY14 PER of 15x. BUY call maintained.

Source: RHB