KUALA LUMPUR (Apr 6): RHB Capital Bhd gains 14 sen or 1.75% after The Edge Weekly reported that RHB Cap is revisiting the idea of an internal reorganisation to enable RHB Bank to take over its listing status.

As at 10.41am, the counter gained 12 sen or 1.5% to trade at RM8.12, translating into a market capitalisation of RM20.605 billion.

Some 100,700 shares were seen having been traded between RM8.01 and RM8.14. It was the sixth largest gainer across the local exchange.

Sources told The Edge Weekly that RHB Cap (fundamental: 1.5; valuation: 2.4) is exploring an internal reorganisation to eliminate its holding company structure and directly list its 100%-owned banking unit, RHB Bank, on Bursa Malaysia.

The report said the assets and companies belonging to RHB Cap will be parked under the listed bank, making the group's structure more efficient.

"The plan was still in the exploratory stage. The exercise could also include a rights issue. The plan for the reorganisation, should it be approved by the board, could be revealed as early as this month," the sources added.

In a note to clients today, Maybank Investment Bank Bhd (MIBB) maintained its buy ratings on the stock with unchanged target price (TP) of RM9.

The firm also maintained its earnings forecasts on RHB Cap at the moment.

"We presently assume a Cost Income Ratio (CIR) of 54% for financial year 2015 (FY15) versus management's target of 51%.

"Assuming our revenue forecast remains intact, expenses would have to come in flat year-on-year (y-o-y) in FY15 for RHB to achieve the lower CIR of 51%. If achieved, this would result in a 7.5% jump in our FY15 net profit forecast and raise our Return on Average Equity (ROAE) forecast to 11.4% from 10.9%, which would be more in line with management's target of at least 11.5%," the firm added.

Meanwhile, Affin Hwang Capital Research also retained its hold ratings with unchanged TP of RM7.70 on RHB Cap.

"We keep our earnings forecasts and valuation unchanged pending feedback from management," it said.

Though it has turned more positive on RHB Cap's outlook, Affin Hwang was concerned that investors will shy away from the stock given potential capital-raising requirements.

"On a standalone basis, RHB Cap may require between RM1.5 billion to RM2 billion in order to lower its double leverage ratio from 137% to below 120%," it added.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)