Malaysian bank gains on ADCB sell-off report

Malaysia's fifth-biggest bank by market value rose to a two-month high yesterday after reports suggested Abu Dhabi Commercial Bank (ADCB) is considering selling its stake in the lender.

Shares of RHB Capital gained as much as 1.3 per cent yesterday after Reuters reported ADCB had hired Goldman Sachs to sell the 25 per cent stake valued at about US$1.4 billion, according to two bankers familiar with the deal.

ADCB acquired the stake in the Malaysian lender in 2008 for 3.9bn ringgit. A new strategic shareholder in RHB Capital could help the company expand, Kenanga Research of Malaysia said in a report.

The emergence of a new strategic shareholder could rejuvenate RHB Capital by bringing in a lot of synergies, considering its established universal bank franchise, strong balance sheet and capable management team, the report added. It said a more active role by new strategic shareholders should help place RHB Capital on the right long-term footing and that RHB Capital's return on equity would further improve.

Kenanga Research maintained a "buy" recommendation on RHB Capital with an unchanged target price of 9 ringgit based on a price-to-book multiple of 1.8 times for this fiscal year. RHB Capital's share price ended 1 sen higher at 8.03 ringgit yesterday. "We believe the exit of ADCB from RHB Capital could be a re-rating catalyst for the stock," Keranga said.

A sale of the RHB stake "would largely address ADCB's significant capital deficit", HC Research said in a note. "ADCB would still be undercapitalised in our view but the capital deficit would be largely addressed."

Shares of ADCB declined 2 per cent to Dh2.39 a share. RHB Capital's largest shareholder, the Employees Provident Fund (EPF), is set to reduce its stake to 40 from 48.4 per cent by the middle of this year.

EPF, which held 57 per cent in July last year, has been gradually trimming its stake, a move analysts said was good for the stock's liquidity.