Maybank proposal to sell WOM seen as good move

> Analysts view disposal of 68.55% stake in Indonesian financial company positively

PETALING JAYA: Analysts are positive on Malayan Banking Bhd’s (Maybank) proposal to dispose of its entire stake in Indonesialisted WOM Finance, as the group will be able to further streamline its operations in the neighbouring country that have been hit by asset quality issues for several years.

“We note that WOM Finance’s asset quality seems to be on a deteriorating trend. Gross NPL (non-profit loan) ratio climbed by 89 basis points (bps) year-over-year to 3.84% as at Q3FY16.

“Hence, we believe that the divestment could be a positive to Maybank Indonesia,” MIDF Research said in a report last Friday.

In a separate note, HLIB Research said it is positive on the proposed disposal as it will enable Maybank to maximise the use of capital in its subsidiary though contribution from the divestment is minimal.

The research house said it believes that the group will undertake more divestments, especially subsidiaries/associates in the segment of finance and asset management/ trustee, as it pursues its focus on corporate and consumer banking and maximise its capital requirement.

Kenanga Research said the disposal will not have any significant impact on the group’s core earnings for FY17, as the impact on Maybank Indonesia is insignificant.

“We maintain our (market perform) call and target price (RM8.04) for the group,” it added.

Overall, MIDF Research said it is neutral on the proposed divestment given that there is no significant impact on the group’s bottom line or book value.

“We estimate that for 9MFY16, WOM Finance contributes only 2.9% to Maybank’s Indonesia’s profit before tax,” it said, adding that it maintained its forecast for the group.

In addition, the research house said it believes that the expected cash consideration will not be distributed to shareholders as the proposed divestment is at Maybank Indonesia’s level.

“Therefore, we make no adjustment to our dividend expectations,” it said

Going forward, MIDF Research said it expects net interest margin will continue to be under pressure and loan growth remain sluggish in financial year 2017.

“Therefore, we are maintaining our ‘neutral’ call on the stock. Our unchanged target price of RM8.10 is based on price-tobook ratio multiple of 1.2 times,” it added.

Maybank announced last week that its subsidiary Maybank Indonesia is divesting its entire equity interest of 68.55% in WOM Finance for 673.8 billion rupiah (RM229.1 million) cash to PT Reliance Capital Management.

Maybank said the divestment is part of Maybank Indonesia’s strategic initiative to maximise its capital use and streamline its customer segmentation.