PETALING JAYA: BIMB Holdings Bhd is expected to start the process of its planned private placement in the second half of this year.
The corporate exercise, which could raise up to RM630mil, according to AmResearch, would go towards settling the outstanding sukuk held by parent Lembaga Tabung Haji (TH) and facilitate the long-awaited reorganisation of the group structure.
Banking sources said while a restructuring has been talked about in the past, there’s a little more certainty of it happening in the near future, what more following recent leadership changes at the pilgrim fund.
“It’s likely to kick off in the second half, beginning with seeking regulatory approvals.
“However, approval processes take time and it’s possible that the exercise could spill over to 2020,” said a source.
AmResearch said the private placement exercise, if it were to take place, would unlock the value of Bank Islam Malaysia Bhd - BIMB’s prized banking subsidiary.
The reorganisation would see Bank Islam taking over the listing status of BIMB, a structure similar to that of Affin Bank Bhd and RHB Bank Bhd.
Recall that in December last year, the group made an early partial redemption of RM609.9mil on a sukuk fully subscribed by TH.
As at Sept 30, 2018, the book value of the sukuk was RM1.34bil and the partial settlement reduces the outstanding on the sukuk to about RM800mil.
According to AmResearch, assuming a 10% discount on the new shares to be placed out, this could enlarge the share capital of BIMB from 1,693 million to 1,882 million shares.
It is also unlikely that there will not be a deterioration of BIMB shareholders’ interest in 59%-owned Syarikat Takaful Malaysia Keluarga Bhd (STM).
This is premised on the likelihood of a swap between the shares of BIMB and Bank Islam as previously reported.
“Each BIMB share will be entitled to 1.3 Bank Islam shares and 0.3 STM share.
“The corporate exercise could see the entire 59% of STM shares being distributed to BIMB shareholders.
“Eventually, all BIMB shareholders will become direct shareholders of Bank Islam and STM,” it said in its report.
The restructuring could see BIMB’s stockbroking business being parked under Bank Islam, but the latter will not hold any shares in STM directly.
However, in the event certain key shareholders do not take up the new shares through the private placement, there is likely to be an improvement in the liquidity of the shares of Bank Islam and STM, said AmResearch.
“STM has been reporting strong earnings, and we believe investors can ride on the potential upside in STM’s shares as its direct shareholder.
“This is envisaged to be beneficial to the investors in the longer term compared with the current corporate structure, where value is trapped through the indirect ownership of STM via BIMB.”
It noted that BIMB’s shares are now trading at 1.1 times their financial year 2019 (FY19) book value (BV).
“This implies that the market is undervaluing Bank Islam at circa 1.0 times BV. Bank Islam has reported an annualised return on equity of 12% for the nine-month period of FY18.”
TH controls 53.5% of BIMB, while its other major shareholder is the Employees Provident Fund with 12.8%.
Shares of BIMB closed unchanged at RM3.78.