Analysts: BII buy still expensive

Source TheStar

PETALING JAYA: Analysts say Malayan Banking Bhd’s (Maybank) revised acquisition price of PT Bank Internasional Indonesia Tbk (BII) is still expensive despite a rebate of RM758.9mil.

An analyst with HwangDBS Vickers Research said although the rebate reduced Maybank’s purchase price to 433 rupiah (15.7 sen) per BII share from 510 rupiah (18.5 sen) earlier, the new deal was still more than four times BII’s book value compared with 4.7 times before.

“It is still expensive because, historically, Indonesia’s mergers and acquisitions are priced between two and 2.5 times book value. We predict Maybank may take longer to turn over its earnings equity, probably in the financial year ending June 30, 2011 (FY11),” she told StarBiz yesterday.

“In view of this development, we expect Maybank’s share price to remain under pressure when the stock market opens on Friday (today),” she said, adding that she expected Maybank’s takeover of BII to be completed by FY10.

Three days ago, Maybank signed a supplement agreement with Singapore’s Fullerton Financial Holdings Pte Ltd and Kookmin Bank of South Korea to acquire BII at a 15% discount, making the total acquisition cost of 55.6% stake in BII held by Sorak Financial Holdings Pte Ltd to RM4.26bil from RM4.8bil previously.

Sorak is 75%-owned by Fullerton, a unit of Temasek Holdings Pte Ltd, and 25%-owned by Kookmin.

During the Prime Minister’s Hari Raya open house on Wednesday, Deputy Prime Minister Datuk Seri Najib Tun Razak said Maybank’s decision to acquire BII was made prior to the global financial crisis and thus it could not back out from its agreement now.

The acquisition was a commercial decision solely made by Maybank and the Government was not involved, he said, adding that the takeover of the republic’s fifth largest bank would, however, benefit Maybank.

Meanwhile, Maybank president and chief executive officer Datuk Seri Abdul Wahid Omar had said in a statement on Tuesday that the acquisition would expand its presence in Indonesia.

Wahid said Indonesia was a key market for the bank to become a leading regional financial services group.

“Our focus will be on making good of our investment in BII and working with BII’s current management to grow the bank despite the challenging economic environment globally,” he said.

Kenanga Research head of research Yeonzon Yeow said he also felt the new deal was expensive.

However, he expected the entire takeover exercise to be completed by early next year and estimated that BII would start contributing to Maybank’s earnings equity in three years.

He said the latest agreement might not be final as it was still subject to approvals by Indonesian financial regulator Bapepam and Bank Negara.

“Bapepam may not approve it if the price is too low, while Bank Negara will want to make sure that the acquisition does not increase Malaysia’s business risks significantly.

“Nevertheless, we maintain a ‘buy’ call with a target price of RM8.80 because Maybank’s shares trade at a discount against the last closing price of RM6.90. In addition, we expect Maybank to maintain a 60% dividend payout ratio,” he added.