INDONESIA - FOREIGN - Affin up on Bank Muamalat Malaysia stake buy talks

www.btimes.com.my -KUALA LUMPUR: Affin Holdings Bhd, Malaysia’s smallest banking group by market value, rallied the most in a month after obtaining central bank approval to start talks to buy a stake in the country’s second-oldest Islamic bank.

The stock advanced as much as 2.3 per cent in Kuala Lumpur trading to RM3.56. It pared gains to RM3.54 at 11:50am, poised for its steepest increase since July 18. It was the second-biggest increase in the Bursa Malaysia Finance Index, which climbed 0.3 per cent.

Acquiring a stake in Bank Muamalat Malaysia Bhd may increase Affin’s scale and help strengthen its position in the Southeast Asian nation’s Islamic banking industry, according to a brokerage report by Alliance Financial Group Bhd today. Bank Muamalat was formed in 1999, the second full-fledged Islamic bank set up in the country after Bank Islam Malaysia Bhd.  (source)


“The deal could offer attractive value propositions to Affin,” Cheah King Yoong, an analyst at Alliance, wrote in the report. “Pricing issues remain the main determinant whether this potential acquisition is earnings and value accretive to the shareholders.”

Cheah kept his strong buy call with a price estimate of RM4.42. That means the stock’s expected 12-month total return, including dividends, is at least 30 per cent.

Kuala Lumpur-based Bank Muamalat is 70 per cent owned by DRB-Hicom Bhd, a Selangor-based automotive, construction and property group. State investment company Khazanah Nasional Bhd. holds the remaining stake, according to DRB’s website.

Negotiations will be completed by the end of the year, Affin said in a filing to the stock exchange yesterday.

DRB needs to pare down its stake in the Islamic bank to comply with Malaysia’s banking rules on maximum shareholding limits. The company may cut its holding to 40 per cent by year- end, Lucius Chong, an analyst at CIMB Group Holdings Bhd, wrote in a report today.

DRB’s planned sale of financial assets, including its insurance business held under Uni.Asia General Insurance Bhd and Uni.Asia Life Assurance Bhd, would “significantly offset the RM3 billion-acquisition” of national carmaker Proton Holdings Bhd, Chong said.

“We believe the market will view the sale positively as it will rerate DRB to a purer auto conglomerate,” he said.

DRB shares advanced as much as 3.5 per cent today, bound for their largest gain since July 20. The benchmark FTSE Bursa Malaysia KLCI Index was 0.1 per cent higher. -- Bloomberg

Source:  http://www.btimes.com.my/Current_News/BTIMES/articles/20120817123050/Article/index_html - Aug 17, 2012