PETALING JAYA: Shares of Alliance Bank Malaysia Bhd
(ABMB) fell by 8.45% or 43 sen yesterday, following a surprise rights issue proposal to shore up its capital, which would result in some dilution to the bank’s financial year 2026 (FY26) earnings per share (EPS).
At market close, the stock was last done at RM4.66 after falling to an intra-day low of RM4.58. A total of 15.5 million shares changed hands.
Last Friday, the bank, the country’s smallest by assets, announced plans for a renounceable rights issue to raise about RM600mil with most of the proceeds to be allocated for working capital.
ABMB did not previously guide for any plans to raise equity capital, analysts said.
Positively, the exercise would shore up the bank’s common equity Tier-1 (CET1) capital ratio to a more comfortable 13.5% and closer to the industry average of 14.4%.
Currently, ABMB’s CET1, a measure that indicates a bank’s financial strength, stood at RM6.6bil at end-December 2024, translating to a CET1 capital ratio of 12.4%.
The bank said the entitlement date and issue price for the rights shares will be determined later.
Notably, Vertical Theme Sdn Bhd (VTSB), the largest shareholder with a 29.1% stake, has committed to fully subscribing to its entitlement, which amounts to about RM174mil, according to UOB Kay Hian Research (UOBKH Research).
“The rights issue may result in an enlarged share base of 10% to 30%, depending on the issue price to raise RM600mil.
“The negative dilution impact on our FY26 EPS amounts to 7.2% to 9.3%, while impact on our target price is a milder 2% to 4% as the new share equity arising from the placement helps to boost our 2026 estimated book value per share and lower the cost of equity, given the improved capital position.
“Post rights issue, we expect the group’s FY26 return on equity (ROE) to moderate from 9.9% to 9.2%.”
UOBKH Research kept its “hold” call on the stock with a target price of RM4.84 per share. It said the impending rights issue is likely to cap near-term outperformance as the stock is currently trading at 0.5 standard deviation above its historical mean price-to-book value.
Of the reports released yesterday, TA Research had the more bullish target price at RM5.80 and a “buy” recommendation.
Assuming an issue price of RM4.20 per rights share, the research firm said ABMB’s net asset per share would decrease slightly from RM4.63 to RM4.59.
“Based on this, we estimate the exercise to dilute FY26 earnings per share by 8% to 9% and reduce ROE by approximately one percentage point.
“Despite the short-term dilution, the exercise will help strengthen the bank’s capital buffer, particularly as loan growth accelerates under the Acceler8 transformation strategy,” TA said.
It pointed out that the bank reported a 14.2% year-on-year loan growth in the fourth quarter of 2024 (4Q24), significantly outpacing the industry average of 5.6%.
“Management remains optimistic about sustaining this momentum, in addition to focusing on customer acquisition, enhancing product and channel offerings to boost fee income and expanding its Islamic banking propositions under the Acceler8 strategy,” TA Research said.
It believes the bank will be able to maintain a dividend payout of at least 40% for FY25.
Early this year, there was speculation that VTSB was looking to dispose of its block to Singapore’s DBS Group Holdings Ltd, which counts Temasek Holdings Ltd as its major shareholder too.
Analysts said the potential entry of DBS Bank as a major shareholder could be positive for its loan and fee income growth.
ABMB’s other major shareholders are the Employees Provident Fund and Global Success Network Sdn Bhd, which is the investment vehicle of Lee Thiam Wah of retail chain 99 Speed Mart Retail Holdings Bhd.
It expects the rights issue exercise to be completed in 3Q25, subject to approvals from Bank Negara, Bursa Malaysia and shareholders at an EGM.
