Public Bank's proposed acquisition of a 44.15% stake in LPI Capital (LPI) for MYR1.72b is mildly positive to the group, says Maybank Investment Bank in its review of the deal that was concluded yesterday. MIB added that positively, capital ratios would still be comfortable, post the acquisition. The house keeps forecasts as BUY on Public Bank, with an unchanged TP of MYR5.40 (FY25E PBV of 1.7x; ROE: 12.7%). MYR1.72b for 44.15%
The major announcement was Public Bank has proposed the acquisition of a 44.15% stake in LPI Capital for a total cash consideration of MYR1.72b or MYR9.80/share (25% discount to the current share price of MYR13.00). The 44.15% comprises 1.41% from the Estate of the Late Tan Sri Dato Sri Dr Teh Hong Piow, and 42.74% is held by Consolidated Teh Holdings Sdn Bhd. Public Bank will be making a Mandatory General Offer (MGO) for the remaining shares at MYR9.80/LPI share, but given the large discount, the house said it expects little acceptance, if any. Public Bank states its intention to maintain LPI's listing status.
Mildly positive to Public Bank
At MYR9.80/share, this is a 25% discount to LPI's current share price of MYR13.00. At this offer price, the stake is being purchased at a forward FY24E PER of 10.5x and a PBV of 1.7x, based on consensus estimates. Based on the acquisition value of MYR1.72b, we expect Public Bank's CET1 ratio at the commercial bank to decline to 12.4% from 13.0%, and to 14.3% from
14.5% at the group, which are still comfortable levels, in its opinion. The house estimate a marginal 1.4% enhancement to Public Bank's FY25E earnings and a slight enhancement in FY25E ROAE to 12.9% from 12.7%.
Paring of stakes
Consolidated Teh Holdings and the estate of the late Tan Sri Teh hold a combined 23.4% stake in Public Bank, which is to be pared down to 10% over the next 5 years, via a restricted offer for sale to eligible employees, directors, and investors. Separately, LPI holds 212.6m shares (1.1% stake) in Public Bank, which is today worth MYR972m or MYR2.44/LPI share. This
shareholding is expected to be disposed off over the next 6-12 months, and the house said it would not rule out the possibility of a special dividend.
