BIMB/Bank Islam - likely to take over

Bank Islam Malaysia Bhd is likely to take over the listing status of its parent company, BIMB Holdings Bhd, in an exercise that could improve valuations.

Sources say the move is likely to happen now (Aug 2013) that BIMB is poised to own 100% of the unlisted Bank Islam by end 2013.

LTH controls BIMB with its 51.2% stake while the EPF owns 9.6%. BIMB controls 51% of Bank Islam.

Bank Islam would pay as much as rm2.96 billion for LTH’s 18.5% and DFG 30.5% equity stake. The deal is to be funded by a rights issue and the sale of Islamic bonds will boost its profitability and allow it to implement more coherent wide strategies.

BIMB is targeting to complete the transaction by end of 2013.

Investors buy into BIMB’s stock mainly for exposure to the fast growing Islamic bank’s operations. About 85% of BIMB’s earnings come from Bank Islam, with the rest mainly from its listed Islamic insurance entity STMB. BIMB owns 65.2% stake of STMB.

By having Bank Islam take over the listing status, investors would get direct exposure to the banking operations rather than through the holding company. This will improve the bank’s valuations as there is a tendency to attach a holding company discount to it.

BIMB will raise about rm1.54 billion from the sale of rights issue shares that come with free warrants and as much as rm1.47 billion from the sale of a 10 year Islamic bonds.