Monday Nov 16th 2009: Affin surges on possibility of merger with HL Bank
- Affin surges on possibility of merger with HL Bank
Written by Joseph Chin
Monday, 16 November 2009 09:40
KUALA LUMPUR: Shares of Affin Holdings rose on speculation that the Guoco Group may look into a merger between HONG LEONG BANK BHD [] and Affin Bank Bhd.
At 9.27am, Affin was up 20 sen to RM2.54 with 1.7 million shares done. Affin-WC rose five sen to 20 sen with 18.4 million units done.
The Edge weekly reported Guoco is believed to have put out feelers to gauge the possibility of raising ringgit funding in the domestic capital market. It was earlier reported that Guoco was busy accumulating shares in Bank of East Asia.
The report said speculation is rife of a merger between Hong Leong Bank Bhd and Affin Bank Bhd, in which Bank of East Asia owns 20.5%.
The classical IS BELIEVED justification used to ram up a stock.
And it WORKED like a charm in a hot market.
And what's amazing is that the local market community and the stock researchers started commenting on what is basically a 'rumour', a 'speculation'. Which as you know is nothing more than coffee talk.
Here is a snippet from a CIMB research note.
- By Winson Ng Gia Yann CFA
The Edge reported that speculation is rife that Guoco's potential acquisition of a stake in Bank of East Asia (BEA) could spark a merger of Hong Leong Bank and Affin Holdings, which is 20% owned by BEA. If true, it would be positive for Hong Leong Bank as it would give it a quantum leap in size and help it achieve cost savings in the longer term. However, the impact of any deal on the bottomline would hinge on the pricing. We believe that Hong Leong Bank's positive attributes have been priced in, going by the 41% jump in its share price over the past three months, which has pushed valuations above industry average. We retain our earnings forecasts and target price of RM7.50, (10% premium over DDM value). The stock remains an UNDERPERFORM premised on the potential de-rating catalysts of (1) above-average valuation, (2) slower recovery in loan growth, (3) lower-than-expected dividend payment, and (4) margin compression. We prefer AMMB Holdings for exposure to the sector.
And even RHB Research technical analysis was quick enough to spot the break out in the stock and released a technical report on the stock and gave it a BUY rating. 
End result?
The stock surged 13%!!!!!!!!!!!
Let's look at Affin-W. 
How nice eh?
These guys speculated on an event, published it and the stock flies!
Wonder what the journalists would be saying to themselves when they retire?
However, at the day end, all hell broke loose! Affin Holdings quickly denied the whole speculation.
On Business Times the next morning:
- Affin: No merger talks with Hong Leong Bank
By Adeline Paul Raj Published: 2009/11/17
Affin Holdings' stock surged 13 per cent yesterday after it was reported that the bank might merge with tycoon Tan Sri Quek Leng Chan's Hong Leong Bank
AFFIN Holdings Bhd (AHB) (5185), owner of the country's second smallest lender Affin Bank Bhd, says it is not in talks to merge its bank with Hong Leong Bank Bhd.
AHB's stock had surged 13 per cent yesterday after a local business weekly reported that the bank might merge with tycoon Tan Sri Quek Leng Chan's Hong Leong Bank.
Its share price rose 30 sen to RM2.64, its highest close in about 22 months. Some 16 million shares changed hands, more than six times that of the previous trading day.
Hong Leong Bank, meanwhile, shed 2 sen to RM8.30.
"The board wishes to clarify that it is not involved in any discussions involving a merger of Affin Bank and Hong Leong Bank," AHB said in a statement to the stock exchange after the market closed.
It said that it was, in fact, not in talks on any potential merger or acquisition relating to its banking operations at the moment.
The business weekly had quoted unnamed sources as saying that a merger between the two banks might be possible as there was speculation that Hong Kong's Guoco Group Ltd might buy a controlling stake in Bank of East Asia Ltd (BEA).
The speculation came about after Guoco raised its stake in BEA last week to 8.01 per cent from 7.99 per cent, emerging as its second largest shareholder.
Quek controls both Guoco and Hong Leong, while BEA has a 20.5 per cent stake in Affin Bank.
"As BEA has 20.5 per cent of Affin, this news sparked talk of a potential merger of Hong Leong Bank and Affin," CIMB Research said in a note yesterday.
BEA's share price rose sharply after Guoco increased its stake in the lender last week. The bank has, however, since said that it has not been in any talks relating to intended acquisitions.
BEA, Hong Kong's largest independent local bank, yesterday officially opened its new regional headquarters in Singapore.
And of course the stock started falling!
By 9.36 am, the following newsclip appeared on the Daily Edge. Investors take profit on Affin
- Investors take profit on Affin
Written by Joseph Chin
Tuesday, 17 November 2009 09:36
KUALA LUMPUR: Investors were quick to take profit on AFFIN HOLDINGS BHD [] shares and its warrants in early trade on Tuesday, Nov 17 after it clarified it was not in discussions involving a merger with HONG LEONG BANK BHD [].
At 9.25am, Affin-WC fell 5.5 sen to 39 sen and it was the most active with 21.68 million units done while the shares slipped 10 sen to RM2.54.
The 30-stock FBM KLCI rose 8.62 points to 1,286.93. Turnover was 139 million shares valued at RM113 million.
In a late statement on Monday, Affin said it was not involved in any negotiations on any potential acquisition or merger relating to the banking operations of the group.
However, investors should note the statement from the board of Affin Holdings that it is "continuously looks at measures to further enhance the performance and value of AHB Group for the benefit of its shareholders".
Its share price rose to a 22-month high yesterday after The Edge weekly reported that the Guoco Group was exploring funding options for a takeover of Affin Bank.
Take profit???????????
Omigosh!
Consider the fact.
If someone bought the story based on the speculations and the speculations have been denied, what does one expect these buyers to do?
Sell would be the logical thing, yes?
And would you call such an action as 'taking profit'?
They were taken for a ride and since the speculation is denied, what else can they do?
How nice can it be? The Edge Weekly spun the news out. Stock flew. Company denies. Stock falls!
Have we not hear such a theme before?
Strange too. Don't you ever wonder about the roles of these so-called business journalists? Are they here to spin out speculations? And if the stock flies, do they consider their job as well done?
And if that was enough, try read the following article on the Daily Edge published at 11.50am, knowing very well the stock is tumbling down!
Talk of possible merger lifts Affin shares
- Talk of possible merger lifts Affin shares
Written by Joyce Goh & Fong Min Hun
Tuesday, 17 November 2009 11:50
PETALING JAYA: AFFIN HOLDINGS BHD [] shares rose to a 22-month high yesterday, following market talk of a possible merger of its unit Affin Bank Bhd — the country’s second smallest bank — and Tan Sri Quek Leng Chan-controlled HONG LEONG BANK BHD [].
At the close of trade yesterday, Affin Holdings gained 30 sen to RM2.64 with 16 million shares changing hands.
The merger talk was prompted by news reports that Quek’s Guoco Group Ltd may consider buying over Hong Kong’s Bank of East Asia (BEA), which owns a 20.5% stake in Affin Holdings.
“Getting the 20.5% stake in Affin through BEA is nothing to be excited about. If it leads to a GO, then that’s something to shout about… But for the moment, it’s better not to jump the gun given that things on the possible BEA buy is said to be still ‘fluid and early’,” said a banking analyst with a local research house.
“If the merger does happen, it will be a convoluted effort as it involves levels above the two banks. Quek will be getting a stake in Affin very indirectly should he buy over BEA. He could just buy it and keep Affin as an investment,” noted the analyst.
Affin in a written note to Bursa Malaysia yesterday, clarified that its board was not involved in any discussions involving a merger of Affin Bank and Hong Leong Bank.
”The board of Affin continuously looks at measures to further enhance the performance and value of Affin group for the benefit of its shareholders. However, at this juncture, the board of Affin is not involved in any negotiations on any potential acquisition or merger relating to the banking operations of the Affin group,” it said.
Meanwhile, earlier yesterday, Affin Bank’s head of corporate communication Thomas Tan noted in a written reply: “Affin Bank does not comment on rumours related to market activities. It does not have a statement to issue at this time.”
Hong Leong Financial Group and Hong Leong Bank officials could not be reached for comment, while Guoco Group’s corporate communications department in Hong Kong had yet to return our call at press time.
Meanwhile, banking analysts and fund managers noted that the management of both Affin Bank and Hong Leong Bank were very diverse and it would take a long drawn effort to merge their operations.
“I guess anything is possible at the moment. It makes business sense because it may be a good time to merge ahead of recovery… but they have to resolve shareholder and cultural issues,” said Choong Khuat Hock, Kumpulan Sentiasa Cermelang Sdn Bhd’s director of research and fund manager.
Some are not sold on the idea.
“I am really doubtful that a merger will happen,” said another local fund manager, adding that Quek’s sights were now trained outside the country.
Regardless, a banking analyst noted: “Investors should look at the fundamentals of the bank and not buy on rumours. With or without this possible merger, we still like Hong Leong Bank as a stock,” said the analyst.
Just recently, Hwang-DBS Vickers upped its target price for Hong Leong Bank to RM9.50 from RM8.
“Although Hong Leong Bank has surged 46% since August 2009, we believe there are still prospects for growth from its regional expansion. We have not accounted for potential growth in Vietnam and possibly Indonesia should any acquisition take place.
“Even at this juncture, we believe Hong Leong Bank offers attractive value proposition with a sustainable 16% ROE in addition to a 3% stable dividend yield with an upside potential,” it noted in a Nov 12 report.
Yesterday, Hong Leong Bank ended trading at RM8.30 while HONG LEONG FINANCIAL GROUP BHD [] closed at its 52-week high of RM6.80.
CIMB Research noted at the beginning of the month it was positive on Affin’s aggressive target of 20% return on equity (ROE) and lower non-performing loans (NPL) ratio. The group’s net NPL ratio declined to 2.96% as at end-June 2009 from 3.3% at end-2008.
“In FY08, Affin Holdings recorded an ROE of 6.8%, which is projected to improve to 9% in FY11. Assuming Affin Holdings and Affin Bank have similar ROE (targets), the group would record a net profit of RM1 billion in FY11, 122.2% higher than our forecast, if it manages to hit an ROE target of 20%,” it said.
CIMB Research set its dividend discount model-based (DDM) target price for Affin Bank at RM2.59 based on 7.9 times FY10 price earnings (PE).
Despite this, some industry observers believe Affin still needs to prove itself. “They still need to reinvent themselves and set itself apart from the other banks in the country. Setting targets is one thing… delivering it, is another,” said an industry observer.
This article appeared in The Edge Financial Daily, November 17, 2009
See how Affin-W comes crashing down!
How now my dearest brown cow?
How nice to be a reporter eh?
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