Private placement top on agenda

PETALING JAYA: BIMB Holdings Bhd’s extraordinary general meeting today will seek to get shareholders’ approval for its proposed internal reorganisation exercise.

The reorganisation, which was announced in December 2019, was delayed due to the Covid-19 outbreak.

It involves a series of proposals to “unlock significant value for shareholders” that will ultimately see BIMB transferring its listing status to wholly-owned subsidiary, Bank Islam Malaysia Bhd.

In December last year, the financial group received the approval from the Finance Ministry and Bank Negara in relation to this exercise.

Among others, BIMB, which is 53.5%-owned by Lembaga Tabung Haji (LTH), plans to undertake a private placement of new shares to raise RM800mil to repay its debts at the holding company level of BIMB.

BIMB has yet to fix the issue price for its private placement.

CGS-CIMB Research, in revisiting the reorganisation exercise said based on new information and its simulation, it “estimates that the share placement will dilute our projected earnings per share (EPS) for BIMB by 4%-6% in FY21-23, based on an assumed issue price of RM3.87 (which was a 10% discount to BIMB’s price of RM4.30 on March 22)”.

The internal reorganisation exercise also includes the distribution of Bank Islam shares to BIMB’s shareholders based on a ratio of 1:1.

The research firm said based on the share price of RM4.30 for BIMB and RM4.85 for its majority controlled Syarikat Takaful Malaysia Keluarga Bhd on March 22, it has “arrived at an estimated theoretical share price of RM3.11 for Bank Islam, post the placement of BIMB shares”.

This translates into a price to book value (P/BV) of 1.05 times based on end-Sep 2020 book value per share. The research firm said it sees this as “attractive as it was below the calendar year 2020 P/BV of 1.16 times for the banking sector on March 22”.

Despite the potential EPS dilution from the private placement, CGS-CIMB has upgraded BIMB to a “hold” as it believes that Bank Islam would fetch higher valuations after it takes over the listing status of BIMB.

Furthermore, it sees the stock being one of the biggest beneficiaries of any hike in the overnight policy rate (OPR) in 2022.

It added that for every 25 basis point hike, it could raise FY22 forecast net profit by around 6%.

Besides LTH, the other major shareholders of BIMB are the Employees Provident Fund Board with 12.8%, while Permodalan Nasional Bhd holds a 5.9% stake.

If all goes according to plan, the group expects to complete the reorganisation by end-August this year.

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