online casino bluebook - online casino gambling guide, to top ranked online casinos and reviews of over 200 gambling related websites. www.onlinecasinobluebook.com also host a casino forum, blog, and casino news articles
Monday December 21, 2009 Analysts say HLB's R5.50 price for EON Cap OK
By YAP LENG KUEN
PETALING JAYA: Hong Leong Bank Bhd (HLB), which has received approval to commence talks with certain shareholders of EON Capital Bhd (EON Cap), is looking at an offer price of around RM5.50 per share.
Sources told StarBiz yesterday that an earlier report quoting BNP Paribas that Rin Kei Mei and the Tiong family could be willing to sell their stake in EON Cap for RM8.20 per share, was “way off the mark’’.
Rin and Tiong family issued a press statement over the weekend denying that they are willing to sell their shares at RM8.20 each to HLB as speculated by a BNP Paribas stock analyst a day earlier.
The duo categorically denied the assertion by BNP Paribas and stressed that “we have not parted any information to analysts of BNP Paribas and others on this matter.”
“After the collapse of Lehman Brothers, valuations of banks have gone down,’’ a source said. “Past valuations look frothy now and the RM9.55 per share that Primus Pacific Partners Ltd paid for its 20.2% block in EON Cap is a thing of the past.’’
A senior analyst from AmResearch said: “Hong Leong’s Tan Sri Quek Leng Chan is not known to overpay on deals. He has been very firm on his value-creation culture.’’
EON Cap’s last traded price was RM6.58; its book value, as at the end of September, was RM5.03. Analysts said an offer price of RM5.50 would put the price to book value at 1.09 times, which is in line with market expectations.
“Market talk has been that Quek was not likely to pay more than 1.3 to 1.4 times book value,’’ an analyst said.
Besides the fact that this is the post-financial crisis era, there are not many competing bids around; hence, EON Cap may not be able to command a very high premium.
The shareholding structure is also fragmented with no controlling shareholder that would be in a better position to negotiate for a significant premium. Rin indirectly owns 15.4% through Kualapura Sdn Bhd (11.1%) and Lintang Emas Sdn Bhd (4.3%) while the Tiong family owns 16.3% through RH Development Sdn Bhd.
Analysts viewed that even Primus might be persuaded to accept an issue of shares at HLB level and ride the upside later.
Khazanah Nasional Bhd and the Employees Provident Fund are also shareholders of EON Cap.
“The shareholders may have to rethink whether it is worth holding onto EON Cap at this juncture,’’ the analyst said. “EON Cap is trying to restructure but many others such as CIMB and Alliance Banking groups have gone way ahead.’’
Some analysts also viewed that EON Cap did not have a strong market share or a significant franchise in lending and deposit taking.
“If they want to wait for the entire transformation to take place, it would take a lot of investment in branding and information technology,’’ the analyst said. “Moreover, from the reports surfacing, one gets the impression that different shareholders seem to want things run in different ways.’’
Another analyst concurred, saying that return on investments for EON Cap was on the low side compared with the bigger banks.
“The only thing is a few years ago, Hong Leong Bank had expressed interest in EON Cap at purportedly RM7 per share, so the offer price of RM5.50 seems a bit of a surprise. But we are dealing with a shrewd investor in Quek.’’
EON Cap has 139 branches. For the third quarter ended Sept 30, it posted a 9.3% increase in net profit to RM75.3mil; for the nine months, net profit surged to RM279.5mil from RM68.1mil.
Hong Leong Bank has 199 branches and sales centres, 17 business centres throughout Malaysia, and one branch each in Singapore and Hong Kong.
It has a 20% stake in China’s Chengdu City Commercial Bank, a proposed joint venture with Bank of Chengdu Co Ltd to operate a licensed finance company in China, and owns a commercial bank in Vietnam.
For the first quarter ended Sept 30, HLB recorded a drop of 3.23% in net profit to RM234.21mil compared with a year earlier.
Hong Kong-based Primus Pacific Partners may not be fond of Hong Leong's bid but its options appear limited
HONG Leong Bank Bhd (5819) may see through its deal to buy smaller rival EON Capital Bhd (EONCap), even without unanimous support from the latter's fragmented shareholders, analysts said.
Primus Pacific Partners Ltd, a Hong Kong-based investment firm that had paid RM9.55 per share for its 20.2 per cent stake in EONCap last year, may not be fond of Hong Leong's bid but its options appear limited.
Primus will need a high price to exit, but Hong Leong, controlled by shrewd investor Tan Sri Quek Leng Chan, is not known to overpay in deals.
"It will be tough for Primus. It's an uphill struggle for them," a banking analyst said.
Despite it being the single largest EONCap shareholder, Primus could be easily eclipsed by other major shareholders whose stakes, when added up, are way bigger.
It is believed that Tan Sri Tiong Hiew King, who holds a 16.3 per cent stake in EONCap, and Singaporean businessman Rin Kei Mei, with another 11.1 per cent, are ready to talk to Hong Leong.
Combined with Khazanah Nasional Bhd's 10 per cent stake, they will together control 37 per cent of EONCap, which is more than sufficient to trigger a general offer for the remaining shares, HwangDBS Vickers Research noted.
The Employees Provident Fund owns another 11.9 per cent of EONCap.
"Let's not forget about the minority shareholders who have roughly 30 per cent combined. This is a good exit strategy for them as they will never see a price as high as RM9.55 as Primus had paid," another analyst said, who estimated that a price of slightly above RM7 per share could be fair for "everybody except Primus".
Shares of EONCap jumped 4.6 per cent yesterday to close at RM6.88, retreating from an earlier gain in the day.
Hong Leong Bank could opt to buy EONCap's assets and liabilities under the takeover rules, where it would only need 50 per cent plus one EONCap share vote by value for the deal to go through, HwangDBS said.
This will be a less messy structure and Hong Leong will not need to worry about Primus being the deal breaker.
Primus also lacks a strong bargaining chip. While a merger could give Hong Leong greater scale and size to meet its aspirations as a regional player, it is likely to walk away and focus on building growth elsewhere if the price is expensive.
Hong Leong has already made solid forays into China and Vietnam, while it is eyeing to enter Indonesia and Thailand.
"These options in high growth, higher margin countries will be better bets for success for Hong Leong," HwangDBS said.
RH Devt, Kualapura, Lintang Emas get BNM nod over proposed sale of EON Cap stakes
Written by Joseph Chin
Monday, 21 December 2009 19:42
KUALA LUMPUR: EON CAPITAL BHD []'s three shareholders -- R.H. Development Corporation Sdn Bhd, Kualapura (M) Sdn Bhd, Lintang Emas -- have received approval from Bank Negara to commence negotiations with HONG LEONG BANK BHD [] for the potential equity divestment of their combined 31.67% stake.
EON Capital said on Monday, Dec 21 that R.H. Development, which owns 16.26% of EON Cap, issued a statement to the banking group that the former had received the approval to start negotiations.
In two other separate statements, EON Cap said Kualapura (which owns 11.12% of EON Cap) and Lintang Emas (4.29% stake) also stated they had received the approval for commence negotiations.
On Saturday, Dec 19, Rin Kei Mei and the Tiong family dismissed speculation they were willing to sell their equity stakes in EON Cap at RM8.20 per share to Hong Leong Bank.
In a joint statement issued by Kualapura (M) Sdn Bhd on Saturday, Dec 19, they denied any assertion by BNP Paribas over a proposed disposal of their stakes. Kualapura is controlled by Rin and his family.
Tuesday December 22, 2009 Hong Leong Bank-EON Cap merger will create Malaysia’s 4th largest bank
By ELAINE ANG
PETALING JAYA: Two major shareholders of EON Capital Bhd (EON Cap) - Singaporean Rin Kei Mei through Kualapura Sdn Bhd and Lintang Emas Sdn Bhd, and the Tiong group through RH Development Sdn Bhd - have received the green light from Bank Negara to negotiate the sale of their stakes in the banking group.
In separate announcements to Bursa Malaysia yesterday, EON Cap said its board had been notified by RH Development Corp, Kualapura and Lintang Emas that they had received approval from Bank Negara to start negotiations with Hong Leong Bank Bhd (HLB).
Rin and the Tiong family had issued a statement over the weekend denying that they were willing to sell their shares at RM8.20 each to HLB as speculated by a BNP Paribas stock analyst.
Analysts had believed that the fragmented and non-strategic shareholders of EON Cap - comprising RH Development under Tan Sri Tiong Hiew King (16.3%), Kualapura and Lintang Emas under Rin (15.4%) and Khazanah Nasional Bhd (10.0%) - could be the main factor driving the potential M&A of EON Cap.
A merger between HLB and EON Cap may turn out to be a win-win situation for both parties if an agreeable pricing could be hammered out, analysts said.
HwangDBS Vickers Research said the merger, if successful, would make the merged entity the country’s fourth largest banking group by assets, overtaking the likes of RHB Capital Bhd and AMMB Holdings Bhd.
“This would give HLB greater financial muscle to meet its aspirations as a regional player,” it said in a report.
Based on past merger and acquisition (M&A) transactions, which were largely a combination of share swaps and some cash outlay, the potential merger could also enable EON Cap shareholders to ride on HLB’s future growth and upside in share price.
In addition, HLB, 64%-owned by Hong Leong Financial Group (HLFG), is currently in breach of the regulatory shareholding limit of 20% for corporations.
“If it part finances the acquisition of EON Cap through the issuance of new shares, this would help HLFG to indirectly pare down its stake in HLB as a result of the dilutive impact of the new share issuance,” OSK Research said.
Kenanga Research concurred that both banks could extract synergies from the merger.
“It would unlock value in EON Cap as HLB is essentially a well-run retail bank with excess deposits, while EON Cap has a strong niche in the hire-purchase business,” it noted.
However, OSK cautioned that EON Cap’s inferior capital position and liquidity ratios would dilute HLB’s superior capital ratios. Moreover, EON Cap’s weaker asset quality could give rise to a potential rise in non-performing loans and provisions, it noted.
“Although RH Development and Kualapura have categorically denied a report that they are willing to sell their stakes at RM8.20 per share to HLB, we think that as long as the pricing is relatively enticing, they would be more than willing to relinquish their stakes,” OSK said.
The research house pointed out that if the Employees Provident Fund (EPF), which has a 10.7% stake, supported the proposed M&A, the combined shareholding of the four major non-strategic shareholders of EON Cap would be sufficient to breach the 50% approval threshold required in an asset sale even if EON Cap’s major controlling shareholder, Primus Pacific Partners with a 20.2% stake, were to object to the pricing and deal given its much higher acquisition cost of RM9.55 per share last year.
Both Khazanah and EPF already have major stakes in CIMB Group Holdings Bhd (28.4%) and RHB Capital (57%) respectively and may see their stakes in EON Cap as non-core assets to be divested.
Even if Primus and EPF were excluded from the equation, the Tiong family, Rin family and Khazanah would have a collective stake of 41.7%, which is more than sufficient to trigger a general offer for the remaining shares not owned by the acquirer.
HwangDBS Vickers has a target acquisition price of RM7.35 per share for EON Cap after adding an M&A premium, Kenanga in the range of RM6.54–RM7.04 and OSK RM7.60 to RM7.90.
Analysts do not expect funding to be an issue as the HLB group’s Tier 1 capital ratio of 15.3% consists entirely of core equity, which leaves substantial room to raise more capital.
EON Cap’s share price surged to a two-year high and closed 30 sen higher at RM6.88 yesterday while HLB shares fell 43 sen to close at RM7.87.
Hong Leong Bank Bhd (5819) may have an upper hand in the takeover of smaller rival EON Capital Bhd (EONCap) as it does not urgently need a local merger, while regional buys are on its radar.
Analysts at ECMlibra Investment Research and HwangDBS Vickers feel that investing in other high-growth markets like Thailand provides more earnings excitement for Hong Leong. As such, it can easily deploy its capital elsewhere if the deal with EONCap falls through.
But a tie-up with EONCap, the country's third smallest lender by asset, will give Hong Leong the economies of scale and ramp up its regional aspiration.
Being the sixth biggest local bank with 199 branches and RM77 billion of assets, Hong Leong does have sufficient capacity to grow without having to go into any domestic mergers.
In the lending business, there are also not much value that EONCap can add to Hong Leong apart from the auto loan segment, as the latter is already strong in deposits, efficient cost and non-interest income, HwangDBS noted.
Regionally, Hong Leong's 20 per cent stake in China's Chengdu City Commercial Bank Co Ltd has started contributing to profits. It also recently secured a highly sought-after banking licence to operate in Vietnam.
The bank, controlled by Tan Sri Quek Leng Chan, may still be eyeing a stake in Siam City Bank PCL in Thailand, according to recent news report.
EONCap's two major shareholders, Singaporean Rin Kei Mei and Tan Sri Tiong Hiew King, holding a combined 31.7 per cent stake, on Monday said they have Bank Negara Malaysia's approval to discuss a share sale with Hong Leong.
However, Hong Kong's Primus Pacific Partners Ltd, which had paid RM9.55 per share for its 20.2 per cent stake in EONCap last year, appears to be the biggest stumbling block in this Hong Leong-EONCap deal. Primus has so far remained silent on its position.
Primus will probably hold out for the best offer considering its high entry price, and the takeover can turn hostile if it tries to block the deal. Still, analysts said it may have limited room to manoeuvre.
Its options include getting an alternative bid, although the prospect of this happening is not all that bright. Any other potential bidders from abroad will first have to pass Bank Negara Malaysia's stringent vetting before talks can start.
But it's unlikely any other local lenders will want to merge with EONCap as three top domestic banks - Malayan Banking Bhd, CIMB Bhd and Public Bank Bhd - have already successfully expanded into the region and are unlikely to buy a small local rival.
The fifth biggest bank, AMMB Holdings Bhd, with a foreign shareholder in ANZ, will likely focus on growing on its own.
And while RHB Capital Bhd, the fourth biggest, could see some merits from a domestic merger, it probably has its hands full right now having recently bought into an Indonesian lender.
The best bet for Primus then is probably to negotiate a fair price from Hong Leong.
"Primus had paid about two times book value when it bought EONCap shares, and the stock is trading at above one time its net asset value now.
"Thus, it is not excessive for Hong Leong to pay two times book for EONCap. I think the reasonable price range can be quite wide," TA Investment Management chief investment officer Choo Swee Kee said.
HONG Leong Bank Bhd (5819) is believed to have informed the board of EON Capital Bhd (EONCap) about its intention to start a formal discussion that could lead to the creation of the country's fourth biggest bank.
Hong Leong, now the sixth largest bank by assets, already has Bank Negara Malaysia's greenlight to talk to certain EONCap shareholders and is said to have asked for the regulator's approval to begin discussions with the board of its smaller rival.
Once the central bank gives its nod, directors of EONCap will have to decide if it wants to be engaged in the discussion and subsequently present any potential proposal from Hong Leong to the shareholders.
Primus Pacific Partners Ltd, one of EONCap's major shareholders seen as the only resistance to the deal, may vote against the discussion. Primus is said to have control of EONCap's seven-member board, industry sources said.
"What is important is for the board of EONCap to consider the proposal and then allow the shareholders to decide," industry sources said.
"The board should act in the interest of shareholders and negotiate. It should put any offer received to shareholders to vote, and not deprive shareholders from their rights," the source said.
Primus is represented on the board by Ng Wing Fai, managing director and founding partner of the Hong Kong-based investment fund. Two independent directors, Hong Kong-based banker Rodney Ward and Malaysian Yeo Kar Peng, were brought onto EONCap's board by Ng and they are believed to support Primus.
Also on the board are key shareholders Rin Kei Mei and Tan Sri Tiong Ik King, who have made public their intention to talk to Hong Leong earlier.
EONCap chairman Tan Sri Syed Anwar Jamalullail and another independent director, Datuk Dr Mohd Shahari Ahmad Jabar, are seen as the neutral parties.
The institutional investors of EONCap - Khazanah Nasional Bhd and the Employees Provident Fund (EPF) - have no appointee on the board.
But industry sources said Khazanah is supportive of a deal between Hong Leong and EONCap, while EPF is probably open to any discussion.
If Primus tries to block the deal at EONCap's board level, Rin and Tiong, who collectively hold 32 per cent stake in EONCap, could request a special shareholder meeting to remove the board.
