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20 October2009

Malaysia’s RHB enters Indonesian market via local bank

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Malaysia’s RHB Capital Bhd has marked its foray into the Indonesian market with its proposed acquisition of a 80-percent stake in PT Bank Mestika Dharma for 1.16 billion ringgit (1$=3.35 ringgit), to be funded via a rights issue exercise, local business daily the StarBiz reported.

The proposed acquisition, to be completed by the second quarter of next year, will be priced at 3.5 times Bank Mestika’s price-to-book ratio and 23 times price to its 2008 earnings, according to RHB Capital director Tan Sri Azlan Zainol.

“This is a fantastic partnership and we are confident that Indonesia will provide the platform for us to achieve our next 1 billion ringgit,” Azlan said yesterday after formalising the conditional sale and purchase agreement between the banking group and PT Mestika Benua Mas, which currently holds 99.95 percent of the issued and paid-up share capital of Bank Mestika.

Bank Mestika’s net profit for the financial year ended December 31, 2008 stood at 63 million. Its assets totalled 1.9 billion ringgit as at June 30 while average return on equity stood at 27 percent between 1999 and 2008. The bank has 50 branches and six cash outlets in Sumatra.

“The Indonesian market provides the largest market and growth opportunity within the Asean region; it is at the top of our agenda,” Azlan said.

The agreement yesterday also included an option for RHB Capital to acquire an additional 9 percent stake in the medium-sized Indonesian bank for 131 million ringgit, which could result in an additional return of up to 15 percent per annum.

Azlan said the planned purchase would be funded via a renounceable rights issue of 361.11 million new RHB Capital shares at 3.60 ringgit each. The exercise is expected to raise 1.3 billion ringgit.

At 3.60 ringgit, the price is a 21.7 percent discount to the stock’s last traded price of 4.60 ringgit on October 16, before it was suspended pending the announcement of this deal. Shares of the banking group will resume trading Tuesday.

RHB Capital’s proposed Indonesian purchase follows CIMB Group Holdings Bhd and Malayan Banking Bhd’s (Maybank) purchase of Bank CIMB Niaga (a merger between PT Bank CIMB Niaga and PT Bank Lippo) and Bank Internasional Indonesia respectively.

CIMB bought Bank Niaga at a much cheaper price of 1.5 times book value compared with Maybank’s acquisition at 4.6 times.

Azlan noted that RHB Capital would “not play catch-up” with CIMB and Maybank. “We will grow at our own pace,“ he said.

Another local bank which has made a foray into the Asian region is Hong Leong Bank Bhd, which recently saw the maiden contribution from its 20 percent associate, China’s Bank of Chengdu Co Ltd.



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