RHB Capital to soldier on with merger

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RHB Capital Bhd
(Dec 11, RM7.59)
Maintain “buy” with target price (TP) of RM9.45.
RHBCap’s appeal for the Employees Provident Fund (EPF) to be allowed to vote on the CIMB Group Holdings Bhd-RHB Cap-Malaysia Building Society Bhd, merger was dismissed by Bursa Malaysia Securities’ Appeals Committee.

The committee decided that the matters raised and the grounds of appeal did not justify a departure from the decision of the Listing Committee.

In particular, it felt that there was no adequate justification that the potential conflict of interests involving EPF had been eliminated or sufficiently mitigated.

We expect CIMB/RHB Cap’s management to soldier on with the merger. CIMB is now in the midst of its due diligence on the banks and hopes to be able to sign the sales and purchase agreement in January 2015. This will be followed by shareholder and court approvals, with a June 2015 deadline for completion of the deal.

We maintain our “buy” call on RHBCap for exposure to the merger with an unchanged TP, pegged to a post-merger financial year 2015 price-to-book value of 1.2 times, supported by a pro forma return on equity of 10.4%. — Maybank IB Research, Dec 11

This article first appeared in The Edge Financial Daily, on December 12, 2014.