MAYBANK - Looking to buy a stake in Bank of Ayudhya? (1155)

Maybank; Buy; RM9.16
Price target: RM11.10; MAY MK

It was reported on Bloomberg that General Electric (GE) may be looking
to sell its stake in Bank of Ayudhya (BAY). GE currently holds 33% of
BAY, a stake which it acquired in 2007 (25% initially and added another
8% after exercising warrants).

This piece of news is not new. Last year, it was rumoured that GE’s
stake in BAY was contended by RHB Capital. Even Maybank’s name emerging
as a potential acquirer is not fresh.

Maybank has consistently been saying that it has not ruled out
raising capital if required, and remains open to M&A in Thailand,
which is still its missing link within its ASEAN commercial banking
footprint.

Although there are no details at this stage, we think pricing would
be paramount for Maybank to consider the acquisition, as we would not
want to see Maybank making another expensive acquisition. The 33% stake
in BAY amounts to approximately RM6.9bn based on BAY’s market cap of
Bt205bn (c. RM21bn) as of the market closing price of Bt34.00 yesterday.

Note that the Thai banks have a foreign shareholding limit of 25%
but a higher stake may be allowed by Bank of Thailand and Minister of
Finance if the target bank is financially weak and they deem it
necessary. BAY currently trades at 1.8x FY12 BV, higher than the
average Thai banks’ FY12 PBV of 1.6x. BAY – which is projected to make
a net profit of Bt14.3bn (+54% y-o-y) in FY12 – mainly focuses on
retail banking and has been one of the best performing Thai banks for
the year. DBSV has a HOLD rating and TP of Bt33.00 on BAY. While BAY
will benefit from populist policies and recovery in domestic new car
sales in Thailand, the bulk of the good news has been priced in.

We have a BUY rating on Maybank with a TP of RM11.10. Maybank remains our favourite bank for its dividend yields (5%) and continued strong earnings momentum.

Source: HwangDBS Research - 13 Sept 2012