MBSB ... Listing Vehicle For Banking Group's Islamic Operations !!!

There is a possibility that MBSB could be listed vehicle for the Islamic banking operations of the proposed CIMB/RHB Cap/MBSB.

The hypothetical scenario assumes that CIMB Islamic Bank Bhd is priced at a price to book of 1.7 times year and RHB Islamic Bank at 1.0 times while MBSB will issue shares at a price to book of 1.8 times to acquire both entities.

This translates into an acquisition cost of rm9.7 billion and estimate CIMB-RHB could end up with a 58% stake in MBSB while the EPF’s shareholding would dilute to 27% from 65%.

There is a trading angle to MBSB. Uncertainties now (July 2014) are pricing and structure of the Islamic banking entities’ merger. If the scenario does not pan out, MBSB shareholders will still either get bought out or get to exchange their shares for those of the largest financial institutions in Malaysia.

The downside risk is of the merger falling through or the pricing/structure of the deal being significantly different from what have been envisages.