Bumiputra-Commerce Holdings Bhd (June 4, RM9.40)
BUY: The proposed merger between BCHB's PT Bank Niaga and Khazanah Nasional Bhd's PT Bank Lippo in Indonesia will expand BCHB's group EPS by 14% and 12% for FY2009 ending Dec 31 and FY2010, respectively.
The merger of both Indonesian banks is expected to add between 92 sen and RM1.16 a share to BCHB's share price based on the solid earnings of Lippo. Hence, we are maintaining our "buy" call for BCHB, with a target price of RM11.70.
Lippo registered a return on equity of 26%, while having a low non-performing loan ratio of 0.6%. The bank generates about the same earnings as Bank Niaga despite its smaller asset base.
The merged entity will become the fifth largest banking group in Indonesia, with an enlarged asset base of Rp95 trillion (about RM32.83 billion), which represents 5.14% of Indonesia's banking sector assets.
Meanwhile, Bank Niaga's loan market share of 4.15% combined with Bank Lippo's 2% translates into a collective 6.15% market share worth some Rp63 trillion. The combined entity's deposit market share will stand at 5.3% worth Rp78 trillion. — ECM Libra (June 3)