Download Dilution to EPS and ROE higher than expected due to lower

08 Sept 2015 | Announcement of Rights Price
Downgrade to NEUTRAL
(from BUY)
RHB Capital Berhad
Revised Target Price (TP): RM6.60
(previously RM8.50)
Dilution to EPS and ROE higher than expected due to lower
Rights Issue Price
INVESTMENT HIGHLIGHTS
Rights Issue price fixed at RM4.82 representing 20.3%
discount to its TERP
Rights Issue will dilute RHB Cap’s FY15 EPS to 67 sen and
ROE to 9.8%
Our forecast has been revised to take into account the
impact of Rights Issue with the details announced
Downgrade to NEUTRAL with revised TP of RM6.60 basing
our valuation now on RHB Bank, the new Bank Holding
Company which will take over the listing status of RHB Cap
by early 2016.
RETURN STATS
Price (7 Sept 2015)
RM5.95
Target Price
RM6.60
Expected Share Price
Return
Expected Dividend Yield
Expected Total Return
The number of Rights Share to be issued will be 517.7m, an
enlargement by 20% to RHB Cap’s existing share capital of 2,588.5m
raising a circa RM2.5b in proceeds. This will bring the total number of
shares for RHB Cap eventually to 3,106.2m shares.
Rights Issue exercise expected to complete by end Oct 2015.
The Group’s internal restructuring exercise is expected to be fully
complete by middle of November 2015. The listing of RHB Bank Group
as the new Bank Holding Company is likely to be finalized by end of
January 2016. Hence, the impact to our forecast from the internal
restructuring exercise will only be on FY16 numbers.
However, immediately upon completion of the Rights Issue Exercise,
EPS, and ROE for FY15 for RHB Cap will be diluted to 67 sen and 9.8%
as compared to our previous estimates of 81 sen and 10.5%
respectively. FY15 BVPS will also decline to RM7.62 from our earlier
forecast of RM8.06.
n.m
+16.0%
STOCK INFO
KLCI
Bursa / Bloomberg
Rights Issue price has been fixed at RM4.82. The Group has
announced the pricing for its Rights Issue at RM4.82 per share with an
entitlement basis of 1 Rights Share for every 5 RHB Cap shares. The
Rights Issue Price represents a discount of 20.3% to the TERP of RHB
Caps shares of RM6.05 based on 5 day VWAP price of up to 4th
September 2015 of RM6.29.
+10.9%
Board / Sector
1,582.85
1066 / RHBC MK
Main / Finance
Syariah Compliant
No
Issued shares (mil)
2,588.5
Par Value (RM)
Market cap. (RM’m)
1.00
15,401.50
Price over NA
0.8x
52-wk price Range
RM5.92 - RM9.24
Beta (against KLCI)
1.10
3-mth Avg Daily Vol
0.82 m
3-mth Avg Daily Value
RM5.66 m
Major Shareholders
EPF
41.58%
Abu Dhabi Investments
21.09%
OSK Equity Holdings
9.97%
Some banking abbreviations used in this report:
TERP = Theoretical Ex-Rights Share Price
BVPS = Book Value Per Share
Overall, the dilution impact was higher than anticipated due to the
recent continued weakness in share price which has resulted in the
Rights Issue price to be lower, hence higher number of Rights Shares to
be issued.
MIDF RESEARCH is a unit of MIDF AMANAH INVESTMENT BANK
Kindly refer to the last page of this publication for important disclosures
MIDF RESEARCH
Tuesday, 08 September 2015
FORECAST
Our forecast has factored in the Rights Issue impact. Also, our FY16 estimates have been revised to take into our
account the impact of tax savings from interest expense and lower finance cost totaling RM120m per annum from the
reduction of Group borrowings with a portion of the Rights Issue proceeds. Our FY16 forecast now reflects the
estimated position based on RHB Bank’s (the new Bank Holding Company’s post completion of the listing its shares by
end Jan 2016, taking over the listing status of RHB Cap) BVPS. We will continue to refine our FY16 estimates once
more details on the Internal Restructuring exercise have been announced.
VALUATION AND RECOMMENDATION
The Group’s corporate restructuring exercise involving capital raising via rights issue of up to RM2.5b, is expected to
be ROE accretive under RHB Bank as the new Bank Holding Company. Based on our estimates, ROE for FY16 under
RHB Bank Group is estimated to be enhanced to 10.8% as compared to 9.9% under RHB Cap. This is due to the
lower shareholders fund under RHB Bank Group with a reduction in goodwill of circa RM3b. We downgrade our rating
to NEUTRAL from BUY with a revised TP of RM6.60 as we now base our valuation on the estimated BVPS for RHB
Bank (as the new Bank Holding Company) of RM5.73 and ascribed a PB multiple of 1.1x on FY16 BVPS. Our revised
TP implies a PER of 11.5x.
INVESTMENT STATISTICS
FYE Dec
FY13
FY14
FY15F
FY16F*
Net interest income (RM’m)
3,275
3,291
3,543
3,786
Other operating income (RM’m)
Islamic Banking income (RM’m)
Total income (RM’m)
Pretax profit (RM’m)
Net profit (RM’m)
EPS (sen)
EPS growth (%)
PER (x)
2,085
591
5,951
2,471
1,831
72.9
-7.7
12.2
2,211
652
6,235
2,735
2,038
79.7
+9.3
13.4
2,196
819
6,559
2,779
2,074
67.0
-15.9
11.2
2,189
912
6,887
2,896
2,230
57.4
-14.3
n.m^
Net dividend (sen)
Net dividend yield (%)
Book value per share (sen)
PBV (x)
ROE (%)
16.3
2.7
6.57
0.9
11.5
6.0
1.0
7.31
0.8
11.5
9.0
1.5
7.62
0.8
9.8
7.4
n.m^
5.73
n.m^
10.8
*Forecast estimated under new Bank Holding Company, RHB Bank which will take over the listing status of RHB Cap in FY16
^n.m as the financial statistics will be based on the new Bank Holding Company, RHB Bank’s stock price which will be different from FY13, FY14
and FY15 which the measures under still based on RHB Cap’s share price
Source: Company, MIDFR
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MIDF RESEARCH
Tuesday, 08 September 2015
DAILY PRICE CHART
Kelvin Ong, CFA
[email protected]
03-2173 8353
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MIDF RESEARCH
Tuesday, 08 September 2015
MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad (23878 - X).
(Bank Pelaburan)
(A Participating Organisation of Bursa Malaysia Securities Berhad)
DISCLOSURES AND DISCLAIMER
This report has been prepared by MIDF AMANAH INVESTMENT BANK BERHAD (23878-X). It is for
distribution only under such circumstances as may be permitted by applicable law.
Readers should be fully aware that this report is for information purposes only. The opinions
contained in this report are based on information obtained or derived from sources that we believe
are reliable. MIDF AMANAH INVESTMENT BANK BERHAD makes no representation or warranty,
expressed or implied, as to the accuracy, completeness or reliability of the information contained
therein and it should not be relied upon as such.
This report is not, and should not be construed as, an offer to buy or sell any securities or other
financial instruments. The analysis contained herein is based on numerous assumptions. Different
assumptions could result in materially different results. All opinions and estimates are subject to
change without notice. The research analysts will initiate, update and cease coverage solely at the
discretion of MIDF AMANAH INVESTMENT BANK BERHAD.
The directors, employees and representatives of MIDF AMANAH INVESTMENT BANK BERHAD may
have interest in any of the securities mentioned and may benefit from the information herein.
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MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS
STOCK RECOMMENDATIONS
BUY
TRADING BUY
NEUTRAL
SELL
TRADING SELL
Total return is expected to be >15% over the next 12 months.
Stock price is expected to rise by >15% within 3-months after a Trading Buy rating has been
assigned due to positive newsflow.
Total return is expected to be between -15% and +15% over the next 12 months.
Negative total return is expected, by -15% or more, over the next 12 months.
Stock price is expected to fall by >15% within 3-months after a Trading Sell rating has been
assigned due to negative newsflow.
SECTOR RECOMMENDATIONS
POSITIVE
The sector is expected to outperform the overall market over the next 12 months.
NEUTRAL
The sector is to perform in line with the overall market over the next 12 months.
NEGATIVE
The sector is expected to underperform the overall market over the next 12 months.
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