Thursday, March 27, 2008

Maybank buys Indonesia’s sixth largest bank

By Star Biz

Malayan Banking Bhd’s share price fell as much as 10.6% or 95 sen in early trade on Thursday on some investors’ concerns that it was paying a high price of RM8.6 bil for a 100% stake in PT Bank Internasional Indonesia Tbk.

It opened at RM8.40, down 55 sen. Within the first hour of trade, there were 14.81 million shares done at prices ranging from RM8 to RM8.45.

At 10am, it was trading at RM8.45, down 50 sen or 5.6%.

The KLCI fell points to 12.18 points to 1,233.24 as investors locked in gains, uninspired by the weak closing on Wall Street. US financial shares slid when concerns resurfaced that bank profits will take much longer than expected to recover from the housing slump. The Dow Jones industrial average closed down 109.74 points, or 0.88%, at 12,422.86.

On Maybank, OSK Investment Research said in a note to clients that the acquisition price was not cheap as based on the acquisition price.

“We must admit that the acquisition price is not cheap as based on the acquisition price, BII is essentially priced at 4.45 times and 61.5 times FY07 BPS and EPS, respectively, or 4.26 times and 33.0 times FY08 BPS and EPS,” it said.

However, it always believed that Maybank should expand its overseas presence in order to mitigate the saturated domestic market share.

“We believe the Indonesia banking sector offers more upside in the long-run as per the ratio of total outstanding loans-to-nominal GDP. However, due to the potential near-term profitability dilution, we have lowered our fair value to RM10.80 but maintain our BUY call,” it said.

On Wednesday, Maybank announced it wanted to take over Sorak Holdings Ltd, which has a 55.7% stake in PT Bank International Indonesia Tbk (BII), from Fullerton Financial Holdings and Kookmin Bank for RM4.8bil cash. It will later make a general offer for all BII shares it does not own. Starbiz reported that to some people, Maybank’s move to pay RM8.6bil, or 4.6 times book value, indicated how desperately the group wanted BII, Indonesia's sixth biggest bank.

The valuation is among the highest in the industry. The offer price is about 20% above Jakarta Stock Exchange-listed (JSE) BII's market price. The book value of 4.6 times is about double the average valuation among Indonesia's publicly traded banks.

The top four banks listed on JSE are currently trading at about 3.9 times. BII's net profit has been declining since 2004. For the year ended Dec 31, 2007, the bank's net profit fell to 404.7 billion rupiah (RM142mil) from 633.7 billion rupiah (RM222.3mil) in 2006.