DRBHCOM (BUY)

Interested Party on DRB’s Uni.Asia

• DRB-Hicom has received approval from Bank Negara Malaysia to assume preliminary negotiations for its 51% stake in Uni.Asia Capital.
• We are positive on DRB’s move to dispose the conventional insurance businesses, indicating DRB’s next step in streamlining its group business.
• We have ascribed 1.5x P/B for the insurance business, which arrives at RM301.5m for DRB’s effective stakes or RM0.16/share (before holding company discount of 20%) to the group.
• However, DRB is likely to realize higher valuation (vs HLIB’s) if based on previous insurance company transaction of 1.36x to 3.35x P/B.
• Maintain BUY with unchanged Target Price of RM3.43

Source: Hong Leong Investment Bank Research - 16 August 2012