Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
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 2 MIDF RESEARCH Tuesday, 08 September 2015 DAILY PRICE CHART Kelvin Ong, CFA [email protected] 03-2173 8353 3 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. Members of the MIDF Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein This document may not be reproduced, distributed or published in any form or for any purpose. 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. 4