KENANGA Research is over the moon as LPI Capital Bhd’s proposed disposal of its entire 1.13% equity interest in Public Bank Bhd has become a reality thus confirming its earlier hypothesis for a handsome return to the latter’s shareholders.
Likely to the tune of a 70% which is slightly lower than the research house’s 80% expectation, the payout is nevertheless “still a commendable c.13% yield”.
“As (LPI’s) recent share price has retreated close to its pre-merger levels at c.RM13.00, it is likely the special dividend has not been priced in yet,” observed analyst y Clement Chua in a company update.
“LPI appears focused on finding investments to replace Public Bank’s dividend income before re-investing, anticipating efficiencies from their collaboration.”
Maintaining its target price of RM16 with an “outperform” call, Kenanga Research reckoned that even without the special dividends, “LPI still leads the pack with yields of 6% -7% (vs its peers’ 4%-5%)”.
On Friday (March 14), LPI announced the proposed disposal of its 1.13% stake in Public Bank to comply with the Companies Act 2016.
The exercise may be implemented in multiple tranches to third party purchaser(s) at a price yet to be determined at the juncture, subject to the approval of LPI’s shareholders.
Nevertheless, assuming the disposal is entirely concluded at Public Bank’s March 14 closing of RM4.48, the total disposal proceeds would amount to RM987 mil, according to Kenanga Research.
Recall that Kenanga Research had on Feb 17 tweaked upward LPI Capital Bhd’s target price to RM16 from RM15 previously in anticipation of “a bountiful 17% special dividend or RM1.93-RM2.41/share in 2H 2025”.
“Though short of our expectations based on our earlier hypothetical disposal proceeds, a 70% payout amounts to RM691 mil in special dividends or RM1.756/share,” projected Kenanga Research.
“This translates to a yield of 13.4% which we believe is remains coveted among investors.”
Losing out on a sizeable dividend income from Public Bank with the proposed disposal (FY2024: RM46.3 mil), the research house expects LPI to be “more eager to utilise the remaining c.29% proceeds to increase its portfolio of equity, debt and other investments”.
“Only if the group is unable to seek suitable investments from the disposal, would it consider utilising it for working capital purposes,” stated Kenanga Research.
“We are not surprised by this as both LPI and Public Bank have expressed strong intent to bolster collaborative efforts and cross-selling which on its own could translate to cost savings and higher operating efficiency.”
At 11.12am, LPI was up 40 sen or 3.1% to RM13.46 with 131,400 shares traded, thus valuing the company at RM5.36 bil. – March 17, 2025
