‘Potential M&A plays abound’

0

KUCHING: With the FTSE Bursa Malay­sia Kuala Lumpur Composite Index (FBM KLCI) recovering to new heights since the general elections a month ago, the opportunities for potential mergers and acquisitions (M&As) lay ahead for inves­tors to leverage on moving forward.

“We see opportunities in M&A plays with corporates unlocking value offer­ing larger upside than the benchmark KLCI,” said HwangDBS Vickers Research Sdn Bhd (HwangDBS Research) in a comprehensive market outlook report yesterday.

“We see value in asset plays which current share prices are trading at sig­nificant discounts to their sum-of-part values,” analysts from the research house stated.

Among the potential M&A plays listed by HwangDBS Research include MISC Bhd, DRB-Hicom Bhd and TA Enterprise Bhd.

For RHB Capital Bhd (RHB Cap, fresh from a merger with OSK Investment Bank Bhd (OSK) that former says will see some RM324 million in synergetic gains over three years, there could be opportunities in merging with Malaysia Building Society Bhd.

“The merged RHB Cap-OSK franchise will have the largest market share based on trading volumes and values.

“With the stronger investment banking and stock broking platform, we expect RHB Cap to build traction in capital market related fee income.”

It added that banking group’s proposed stake in Indonesia’s Bank Mestika is still on the cards and RHB Cap is willing to take the first 40 per cent stake pending further discussions with Indonesian regulators.

The proposed acquisition is expected to bring its overseas income contribution closer to its 10 per cent target from five per cent currently. RHB Cap was the cheapest large capitalisation stock by price earnings comparison in HwangDBS Research’s report.

Other potential M&A plays that the research house listed are Sime Darby Bhd’s offer for Eastern and Oriental Bhd which is pending judicial review and Jobstreet Corporation Bhd in which cur­rent shareholder Australia-listed SEEK Ltd may raise its stake again.

In addition, highway toll operator and Build-Operate-Transfer (BOT) player Lingkaran Trans Kota Holdings Bhd may see a potential consolidation of toll assets by the government while Boustead Heavy Industries Corporation Bhd may potentially be taken private by major shareholder Boustead Holdings Bhd.

In addition, the research team noted that some corporations might also want to realise greater value by listing some business units. These include IOI Cor­poration Bhd, Malaysian Bulk Carriers Bhd, MMC Corporation Bhd and Hong Leong Bank Bhd.

“Given that many stocks are trading at the high end of their historical valuation range, we recommend being selective,” the research team emphasised in the report.