HSBC is buying 88.9% of Bank Ekonomi Raharja ('Bank Ekonomi') of Indonesia for US$607.5 million and is offering to buy the rest of its shares. The entire deal will be worth about US$683.4 million (RM2.4 billion) and will almost double HSBC's presence in the world's fourth most populous nation. HSBC has been operating in Indonesia since 1884 and currently has 105 outlets. Bank Ekonomi presently has a total of 86 branches.
It is interesting to note that Bank Ekonomi has a Shareholders' Funds of Rp1.121 Trillion (RM392 million), which means that HSBC is effectively buying Bank Ekonomi at a Price to Book multiple of 6.1 times! This is much higher than the Price to Book multiple of 4.6 times that Maybank will be paying to acquire Bank Internasional Indonesia ('BII') [before subsequent discounts granted by the sellers]. The different in size may account for the higher multiple demanded by the sellers in the Bank Ekonomi deal as compared to the BII deal, as part of the purchase price must include the price of the banking license itself. Nevertheless, one may wonder why does HSBC want to pay such a high premium for this bank since it already has a foothold in Indonesia? Whatever the reason maybe, this news may serve to vindicate Maybank's management's decision to acquire BII as well as confirming that it has not paid an unreasonably high price for that acquisition.
For more on the Bank Ekonomi deal, go here & here. For financial highlights of Bank Ekonomi, go here.
2 comments:
Hi Alex, I am actually interested to see Maybank revisit 1998 low or at least beats itself up as much.
The chart in April shown Maybank had broken almost every long term support - thus explained it's current price to go to RM5 now - of course it's easy to say when it has happened.
With the Global economy is pretty much shaking up and KLCI has been on the uptrend for quite a long time now, I have the feeling that major drop will happen in time to come. I'll then buy i.e. when the blood is on the street.
What's your view? thanks
Hi consultant,
Maybank has a very strong horizontal support at RM4.90-5.00 and thereafter at RM3.80-4.00. With stability returning to the credit market, I believe Maybank should be able to maintain at the RM5.00 level for now. My main concern is that BII's loan book may have more substandard loans than expected. I guess the market is factoring in that possibility right now, which could lead to more weakness in the share price in the weeks ahead.
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