Thursday, December 2, 2010

HLIB Research maintains Buy on RHB, TP at RM9.36

KUALA LUMPUR: Hong Leong Investment Bank Research (HLIB Research) is maintaining its Buy call and target price of RM9.36 for RHB CAPITAL BHD [], based on Gordon Growth with returns on equity of 15.3% and WACC of 9.3%.

The research house said on Thursday, Dec 2 that the Employees Provident Fund's (EPF) undertaking to subscribe for no less than 51% remains unchanged but subject to written confirmation from the Ministry of Finance (via Bank Negara) that there is no objection for EPF to hold more than 45% of RHB Cap.

In the event the confirmation is withheld, EPF irrevocable undertakes to subscribe for a minimum of 45% of the rights issue.

EPF currently holds 53.4% in RHB Cap and is further pairing down its stake in the company via private placement (of 200 million shares or 9.3%) to meet the regulatory requirement of holding not more than 45% (40% holding block as the strategic shareholder and another 5% buffer for change in shareholding by both internal and external Fund Managers) by June 2011.

If the placement is successful, it could reduce EPF's stake to circa 44.1% or less. If the placement is not successful, and confirmation is withheld, EPF's stake will be reduced post rights issue.

"We believe the placement would be well received as valuations are still relatively lower vis-''-vis its larger peers as well as expectation of strong earnings growth ahead," it said.

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