KUCHING: The acquisition of Singapore-based Kim Eng Holdings Ltd (Kim Eng) will help push Maybank Bhd (Maybank) one step closer to becoming a leading Asean wholesale bank.

In its statement on Thursday, the homegrown bankgroup proposed to acquire a 44.6 per cent stake in Kim Eng – a regional securities and investment broker – for S$798 million (about RM1.9 billion) through its wholly-owned subsidiary, Aseam Credit Sdn Bhd (ACSB). The overall value of the deal could be well up to S$1.79 billion (RM4.26 billion).

“Kim Eng’s strong regional footprint and access to a wide base of around 200,000 clients will complement Maybank’s international operations, since the latter does not have much significant presence in countries such as India, Thailand, Hong Kong and the Philippines,” observed TA Securities Holdings Bhd’s banking sector analyst, Wong Li Hsia in an online note yesterday.

In its analysts’ briefing Thursday, Maybank laid out several key takeaways that included, among others, its intention to take Kim Eng private wherein all its experienced team would be retained.

“The retention of Kim Eng’s management team is due to minimal overlap between the businesses, from a geographical and business line perspective. This, we believe is important to ensure business continuity and to preserve the franchise.

Here, Kim Eng’s chairman and chief executive, Ronald Ooi has agreed to lead Kim Eng for a minimum of three years,” said Wong, adding that Maybank would appoint nominees to Kim Eng’s board.

The entire exercise would be slated for completion by this coming May, after which Maybank would not be maintaining Kim Eng’s listing status, should it reach the applicable threshold.

Additionally, the entire acquisition could shave off some 120 basis points off current Maybank’s Tier-1 and RWCR (risk-weighted capital ratio) from 10.6 per cent and 13.6 per cent, respectively, to 9.4 per cent and 12.4 per cent, respectively.

“Maybank has further revealed that there are no plans at this juncture to raise equity but instead noted that the group would raise some debt in Singapore dollar. This would ultimately raise the group’s RWCR to 14.2 per cent to fund the acquisition and further business growth opportunities,” explained Wong.

Meanwhile, RAM Rating Services Bhd opined that the proposed deal would not have any impact on Maybank’s AAA/P1 ratings.

“It would enable the bankgroup’s subsidiary, Maybank Investment Bank Bhd (rated AAA/Stable/P1), to gain a strong regional foothold and instant access to the Asean market,” the ratings agency said yesterday.

To note, Maybank’s shares opened on Bursa Malaysia at RM9.23 per share yesterday; 22 sen higher after announcing the Kim Eng’s proposed acquisition. Prior to that, its shares were suspended Thursday pending the announcement of the material corporate proposal.

“Nevertheless, we believe that Maybank would require some time to reap the full benefits of Kim Eng’s franchise,” added RAM Ratings.

As at end of September last year, Kim Eng’s shareholders’ equity stood at S$937.6 million (RM2.22 billion), with S$50.2 million (RM118.84 million) of after-tax profit for the nine-month period.

On another note, ECM Libra Capital Sdn Bhd’s head of research Bernard Ching noticed that while the proposal would signal a significant milestone for Maybank, the regional ‘jigsaw’ remained somewhat ‘incomplete’.

“Kim Eng is a good fit for Maybank as the former’s market-leading stockbroking business and investment banking presense in the region will fill a big missing piece of Maybank’s jigsaw to become leading wholesale bank in the region.

“The next missing piece in the jigsaw, however, is a commercial bank in Thailand,” he pointed out.

For the moment, ECM Libra maintained its ‘buy’ recommendation for Maybank, with an unchanged target price of RM10.26 per share.

“While we expect synergistic benefits to be reaped going forward, immediate earnings impact will be negligible. Based on Kim Eng’s annualised nine-month’s PATMI (profit after tax and minority interest) for last year, incremental earnings accretion to Maybank should be hovering around three per cent in 2012, before accounting for incremental financing cost,” added Ching.