Public Bank Berhad announced yesterday that it has proposed to acquire the remaining 26.77% stake in PFHL that it does not already own through a scheme of arrangement, offering minority shareholders HK$2.50, or approximately RM1.29, per share.
Giving its view on the matter, CIMB Securities has maintained its BUY call and RM5.50 target price on Public Bank Bhd, viewing the proposed privatisation of its Hong Kong-listed subsidiary Public Financial Holdings Ltd (PFHL) as strategically positive but having only a negligible impact on the banking group’s earnings.
PBB currently owns 73.23% of PFHL. Upon completion of the exercise, PFHL would become a wholly owned subsidiary of PBB and be delisted from the Hong Kong Stock Exchange.
CIMB said the offer price represents a 61.3% premium to PFHL’s last traded price and a 74% to 84% premium to its historical average trading prices.
However, the offer remains at a substantial 64.7% discount to PFHL’s net asset value (NAV) of HK$7.08 per share as at June 30, 2026, consistent with the company’s longstanding discount to book value.
The cancellation price is final and will not be increased.
CIMB estimates PBB will spend about RM378.6 million, representing less than 1% of shareholders’ funds, to acquire the outstanding 26.77% stake, with the transaction likely to be funded through internally generated funds.
Based on PBB’s FY2025 pro forma illustration, profit after tax would increase marginally to RM7.231 billion from RM7.224 billion, while earnings per share would remain unchanged at 37 sen.
While earnings accretion is therefore negligible, CIMB said the transaction is mildly NAV-accretive because PBB is acquiring PFHL’s minority stake at a substantial discount to its underlying book value.
The research house estimates PBB’s NAV per share would increase to RM3.14 from RM3.10 following the exercise.
“We are largely neutral on the proposed PFHL privatisation, given its limited impact on earnings, capital and valuation,” CIMB said.
Beyond its immediate financial impact, CIMB said the exercise would simplify PFHL’s ownership structure and allow for closer alignment of strategic priorities, capital allocation and operational initiatives with the wider Public Bank group.
Taking PFHL private would also remove constraints associated with having a listed minority shareholder base and eliminate recurring listing and compliance expenses.
CIMB believes this could allow resources to be redirected towards PBB’s core banking operations and longer-term business optimisation.
The proposed privatisation remains subject to shareholder, regulatory and court approvals, including approval from PFHL’s disinterested shareholders, sanction by the Bermuda Court and requirements of the Hong Kong Stock Exchange.
The scheme will lapse if the relevant conditions are not satisfied or waived, where applicable, by the March 8, 2027 long-stop date.
CIMB reiterated its BUY recommendation and RM5.50 target price, based on an FY2026 forecast price-to-book value multiple of 1.69 times.
The valuation incorporates an adjusted FY2026 return on equity of 13%, cost of equity of 8.95% and terminal growth assumption of 3%.
The research house said the privatisation’s modest NAV accretion and strategic benefits were insufficient to change its earnings forecasts or investment thesis.
Despite continuing structural pressure on net interest margins, CIMB said Public Bank continues to differentiate itself through strong asset quality, conservative provisioning and execution, while healthy loan growth and expanding wealth and fee income provide additional earnings support.
The bank’s RM3.5 billion capital-return programme and 60% ordinary dividend payout should also support shareholder returns and its premium valuation, CIMB said.
Key downside risks to its view include sharper-than-expected net interest margin compression, weaker loan growth, deterioration in asset quality and higher operating expenses arising from inflation and elevated technology spending.
