RHB Cap

RHB Cap: In an effort to create better value and improve tax efficiency, there is a proposal to restructure RHB Cap Bhd in an exercise that will lead to its privatization. The extensive proposal suggests that RHB Bank be re-listed later and the banking group be enlarged with the subsequent injection of MBSB at a later stage.

The rationale for the proposals is to prepare the group to meet changes in the upcoming new FSA as well as to create a more efficient platform for dividend payments and further strengthen the capital base.

The timing of the restructuring and whether the major shareholders of the group – which include the EPF – are agreeable to the proposal remain unknown.

The EPF holds 41% equity interests in the group, had yet to respond to such speculation. The two other major shareholders of RHB Cap are Middle East based Aabar Investments, with a 22% stake, and OSK holdings with 9.8% stake.

At rm8.30, the stock is still trading at a cheap valuation of 1.2 times.

With the OSK acquisition completed, RHB Cap has another target on the table – Indonesia’s Bank Mestika – and thus, it is not surprising that its major shareholders are exploring avenues to ensure its capital base remains strong.

Banking observers are expecting the group to make a rights issue soon. The company maintained it was likely to contemplate a rights issue but hinted that the size of the issue would likely be only slightly larger than the cost of rm651 million to acquire Bank Mestika. This is less than its initial assumption of rm1 billion.

Speculation over a merger and acquisition exercise between RHB Cap and MBSB has always been there because the EPF is the largest shareholder in both financial groups.

The EPF currently (March 2013) has two good financial assets in its table – MBSB and RHB Cap.