KUALA LUMPUR: Public Bank Bhd
and LPI Capital Bhd, which resumed trading today after being suspended for two days since Oct 9, traded lower on their resumption of trading.
The bank fell 14 sen, or 3.06%, to RM4.43 at 9:30 am. It is currently the most actively traded counter on Bursa Malaysia, with 32.6 million shares exchanged.
LPI, the top decliner on Bursa Malaysia, slid 36 sen, or 2.77%, to RM12.64 with 478,000 shares traded.
Public Bank announced yesterday that it is acquiring a 44.15% stake in LPI Capital from the estate of the late Tan Sri Teh Hong Piow and Consolidated Teh Holdings Sdn Bhd (ConTeh) for RM1.72 bil cash, or RM9.80 per share.
The bank said the acquisition will trigger a mandatory general offer (MGO) to buy all remaining LPI shares not already held by Public Bank at RM9.80 per share.
In addition, Teh Li Shian Diona, the youngest daughter of the late Tan Sri Dr Teh Hong Piow, announced that the estate and ConTeh plan to gradually sell some of their Public Bank shares over the next five years, reducing the Teh family's holdings from 23.41% to 10% in compliance with the Financial Services Act.
MIDF Research said that based on LPI’s closing price prior to its trading suspension and 5-day volume-weighted average price (VWAP) of RM13.00 and RM12.84 respectively, the purchase and offer price is a discount of 24.6% and 23.7% respectively.
The offer price implies a price-to-book value (PBV) of 1.71x, which is a discount from its current P/BV of 2.3x.
“With this in mind, we believe that the MGO will not likely see any interest from the remaining shareholders. Public Bank intends to maintain the listing of LPI,” MIDF said.
The research house said the acquisition represents an opportunity for the group to further expand its general insurance segment through the LPI Group’s platform to immediately gain a strong foothold and instant access to the LPI Group’s client base in Malaysia.
Currently, the group’s general insurance segment is undertaken in Cambodia via its 55%-owned subsidiary, namely Campu Lonpac Insurance Plc.
“Assuming that the MGO receives full acceptance, the pro forma impact based on FY23 will see a minor lift to Public Bank’s earnings with EPS of 1 sen from 35 sen to 36 sen, which is a +2.8% lift.
“Meanwhile, there will be no change to Public’s BVPS, and CET-1 ratio impact of only -20bps. Based on our model, we estimate the impact of 5% to our FY25 estimate of Public Bank’s earnings,” MIDF said.
The research house has maintained its “buy” call on Public Bank with an unchanged target price of RM5.16.
Meanwhile, TA Securities described the acquisition price of RM9.80 per share as reasonable. With a PBV of approximately 1.7x, the offer presents a slight premium compared to recent transactions in Malaysia, where average PBV multiples have been around 1.6x.
It noted that the premium appears justified, given that PBB is acquiring a controlling stake in LPI, which likely provides additional strategic benefits such as greater influence over LPI's operations and synergies within the group.
“However, the offer price represents a notable 23.7% discount to LPI’s 5-day VWAP and a discount to its current PBV of around 2.3x. Given this significant discount, we believe that minority shareholders will unlikely tender their shares under the MGO,” TA said.
“Overall, we are optimistic about this acquisition, as it aligns with PBB's strategy to enhance its presence in the insurance sector through LPI, a leading general insurer in Malaysia. The acquisition is expected to be earnings accretive,” it added.
Consensus net profit forecasts for LPI in FY24 and FY25 are RM371mil and RM393.4mil, respectively. With that, TA estimates that PBB's 44.15% stake in LPI would enhance group earnings by around 2%, translating into an uplift in ROE by 20-25 bps.
