Partnership to help RHB Cap enter Gulf states

KUALA LUMPUR: Abu Dhabi Commercial Bank’s (ADCB) acquisition of a 25% stake in RHB Capital Bhd is positive for the latter as it can potentially grow its banking franchise in the booming Gulf states, although not quantifiable for now, according to a local research.

Aseambankers Equity Research said the deal could help RHB Cap move up the value chain and become one of the top three financial groups in Asean by 2020.

“While the deal will not trigger a general offer for the remaining RHB Cap shares, it has set a new benchmark for the latter’s share price,” it said.

ADCB had acquired the 25% stake in RHB Cap at RM7.20 per share for RM3.87bil from the Employees Provident Fund (EPF).

“At RM7.20, this represents a good 50% premium over the RM4.80 that EPF paid last year to gain control of RHB Cap,” said Aseambankers Research.

The latest deal valued RHB Cap at 2.2 times price/book for 2007, quite similar to valuations for the 20.2% block in EON Capital Bhd transacted early this year at 2.1 times, it said.

“In terms of valuation, ADCB is paying a price-to-earnings ratio (PER) of 20.1 times on historical financial year ended Dec 31 (FY07), and 17.6 times on potential FY08 earnings, according to our estimates,” it said.

The acquisition would see ADCB emerging as the second single largest shareholder behind EPF, whose stake would be trimmed to 57% from 82%. The EPF had also asked for a six-month extension to lower its shareholding in RHB Cap to 35% from the earlier deadline of mid-year.

Japan’s Sumitomo Mitsui Banking Corp may also take up a 5% stake in RHB Cap, which would pare down EPF’s stake to 52%.

Aseambankers Research said the EPF still needed to place out another 17% of RHB Cap by year-end.

Meanwhile, OSK Investment Research said ADCB’s entry should also be positive, as the latter was a leading full-service commercial bank operating in the Gulf Cooperation Council (GCC) region.

ADCB is also strong in the retail, commercial, corporate and high net-worth segments in the United Arab Emirates.

“With this new alliance, RHB Cap and ADCB can now position themselves to leverage on growing business flows between GCC and Asean as well as strengthen RHB Cap’s position as a global and regional Islamic banking player,” it said.