RHB Capital (RM6.15; Buy; Price Target: RM7.30; RHBC MK)

Completion of the acquisition of Bank Mestika extended
RHB Capital Bhd (RHB Cap), together with PT Mestika Benua
Mas (the vendor of PT Bank Mestika Dharma), had mutually
agreed to extend the long-stop date for the acquisition of
PT Bank Mestika Dharma to 19 April 2011.
Recall that RHB Cap had pushed forward the timeline from
2Q10 to 3Q10 previously. Essentially, we think this round of
extension of time would not have a significant impact on
RHB Cap’s earnings. Based on Bank Mestika’s profit track
record of RM60-65m p.a., we expect Bank Mestika to
contribute c.4% to RHB Cap’s earnings, assuming it does
complete by FY11. Bank Mestika’s earnings contribution has
not been factored in our forecasts at this juncture.
RHB Cap is a laggard play, trading at 1.1x FY11 PBV vs
sector average for Malaysian banks of 1.8x. Our TP is based
on the Gordon Growth Model with the following
assumptions: 15% sustainable ROE, 4% long term growth
and 10.7% cost of equity. Maintain Buy.