No deal yet on Temasek’s AFG stake sale

PETALING JAYA: While speculation is rife that the Singapore government’s investment arm Temasek Holdings Pte Ltd and co-investor Langkah Bahagia Sdn Bhd are keen to divest their combined stake of close to 30% in Alliance Financial Group Bhd (AFG), sources said they have yet to seek the advice of investment banks on how to proceed.

“No mandate has been given out yet on this deal,” sources familiar with the situation told StarBizWeek yesterday.

Market talk has it that Temasek may look to sell its stake in AFG, hot on the heels of its partial stakes divestment in two of China’s biggest banks – Bank of China and China Construction Bank – announced this week.

It was previously reported that Langkah Bahagia, a company believed to be linked to former finance minister Tun Daim Zainuddin, has been keen to divest its stake in AFG for quite some time. Essentially, Temasek and Langkah Bahagia have a combined stake of 29.06% in AFG through investment vehicle Vertical Theme Sdn Bhd.

Vertical Theme Sdn Bhd is 51% held by Langkah Bahagia and the balance owned indirectly by Temasek. Thus, Langkah Bahagia’s stake in AFG amounts to some 14.8% while 14.26% is indirectly held by Temasek.

However, some local banking analysts are unsure if Temasek would want to exit AFG, especially since its management has time and time again reiterated Temasek’s interest in having a presence in the local banking scene.

“The question has been raised before, and Alliance’s management has maintained that Temasek would not want to sell the stake as it wants to maintain its presence in the Malaysian banking scene,” said a banking analyst with a local research house.

Just last year, Singaporean Sng Seow Wah was appointed to lead the group’s banking division, Alliance Bank Malaysia Bhd. He is also a director of AFG. Prior to joining Alliance Bank, Sng was the executive vice-president, head of human resources, special projects and corporate communications at Fullerton Financial Holdings (International) Pte Ltd, which is part of Temasek Holdings.

Analysts have also said that AFG can be an attractive merger and acquisition target for foreign players such as Singapore’s DBS Group Holdings Ltd (which is 27% owned by Temasek also). AFG is the country’s smallest bank by asset size, which stands at RM36.07bil as at financial year ended March 31.

OSK Research said in a report in May that Sng’s appointment may be a sign of Singapore’s DBS Group playing a more direct role in AFG. Another banking analyst said that Alliance was a good takeover target and attached an average book value of two times to a potential takeover deal.

“But a wider industry range would be 1.8 times to 2.2 times, since EON Capital Bhd was taken over at 1.4 times book value while the recent stake sale in RHB Capital Bhd by Abu Dhabi Commercial Bank was done at 2.25 times price-to-book value,” she said.

AFG’s price-to-book multiple was 1.5 times while its price-to-earnings multiple was 11.9 times as at March 31.

The company saw its share price coming under selling pressure yesterday, shedding 16 sen to end at RM3.46 with some 8.49 million shares changing hands.