RHB BANK BHD

By Maybank IB Research Hold Target price: RM5.90

ABU DHABI’s leading strategic investment company Mubadala Investment Co has placed out 120.3 million shares (3% stake) in RHB at RM5.07 per share, this being at the lower end of its proposed RM5.07 to RM5.18 per share range.

This disposal raises about RM610mil. At RM5.07, this translates to a forward FY19 price-earnings ratio of 8.5 times against its historical forward mean of 10.3 times.

It also translates to a FY19 price-to-book value (PBV) of 0.8 times for a return on equity (ROE) of 9.9% and is a 14% discount to Maybank IB Research’s target price of RM5.90.

Investors will recall that Mubadala, through its unit Aabar Investments, had purchased a 24.9% stake in RHB Bank from its sister company Abu Dhabi Commercial Bank, back in 2011 for RM10.80 per share (PBV of about 2.2 times).

The shareholding subsequently diluted to 17.7%, principally from not taking up RHB’s one-for-five rights issue in 2015.

With this placement, Mubadala would still be a substantial shareholder of RHB with a remaining 14.7% stake.

“There is, in our view, the risk of a share overhang on the stock, given that it is not clear what Mubadala plans to do with the remaining stake that it has in the banking group. Mubadala has largely been a passive investor in RHB and further disposals cannot be ruled out,” said Maybank IB Research.

The research house maintains its “hold” call on RHB with an unchanged target price of RM5.90, pegged to a 2019 PBV of 0.9 times.