KUALA LUMPUR: Pricing issue remains the main determinant for Affin Holdings Bhd whether the potential bid for a stake in Bank Muamalat Malaysia Bhd (BMMB) is earnings and value accretive to its shareholders, although the deal can offer attractive value propositions.

Alliance Research said Affin has received Bank Negara Malaysia's nod to negotiate with DRB-HICOM Bhd and Khazanah Nasional Bhd for a stake in BMMB.

DRB-HICOM and Khazanah currently have 70 per cent and 30 per cent interest in BMMB, respectively.

"Details on this potential acquisition remain scanty at this point and negotiation is preliminary at this stage.

"Furthermore, DRB-HICOM's past two attempts to pare down its stake in BMMB have not been successful," it said in a research note.

Nevertheless, the acquisition of BMMB, being one of the only few pure Islamic banks in Malaysia, could strengthen Affin's foothold in the Islamic banking sector.

Alliance Research has maintained its 'strong buy' call on Affin with an unchanged target price of RM4.42.

Meanwhile, Kenanga Research said if the acquisition was successful, it would allow Affin to add BMMB's 58 branches into its existing branch networks and tap into existing business collaboration with DRB-HICOM, in particularly with Pos Malaysia Bhd and Proton Holdings Bhd.

"Assuming a 100 per cent stake acquisition in BMMB is worth as much as RM2 billion with a price to book value valuation of 1.4x, which is in line with recent commercial and investment banks merger multiples, the acquisition could lead to a marginal earning enhancement," it said.

Kenanga has maintained its 'outperform' rating on Affin with an unchanged target price of RM4.30. -- BERNAMA