KUALA LUMPUR: Affin Bank Bhd shares shot up to a high of RM3.11 today from Friday's close of RM2.87 on the back of reports that Bank Negara had given the nod for the Sarawak government to buy a majority stake in the financial institution.
The stock surged more than eight per cent to RM3.11 in early trade before tapering to RM3.01 at 11am, but was still nearly five per cent higher than Friday's closing. This valued Affin Bank at RM7.23 billion.
The RM3.11 intraday high was also some way off the at least five-year high of RM3.43 recorded on Aug 21 this year.
The stock ended the day 4.53 per cent or 13 sen higher to RM3 with 8.31 million shares traded for a market capitalisation of RM7.20 billion.
A report emerged on Saturday that Sarawak Premier Tan Sri Abang Johari Tun Openg said it had received approval from the central bank on the acquisition.
Affin Bank's current major shareholder is the military investment arm, Armed Forces Fund Board (LTAT), which also fully owns Boustead Holdings Bhd and other entities.
LTAT has about 28 per cent stake, followed by Bank of East Asia Ltd, with over 23 per cent and Boustead with about 20 per cent.
Affin Bank, in a filing with Bursa Malaysia on April 13 last year, said LTAT had sold 112.56 million shares in the bank to the Sarawak financial secretary for RM221.74 million.
The bank said it had sold the shares, representing 4.95 per cent of the total issued shares, at RM1.97 each.
On Saturday, Abang Johari reportedly said all matters related to acquiring a major stake in Affin Bank, including the conditions set by Bank Negara Malaysia, had been resolved.
"We intend to take over this bank soon. Everything is settled, including (approval from) Bank Negara. You will hear the announcement within a week," he said at the 100th anniversary celebration of Rumah Samu in Kuching.
On July 30, Abang Johari reportedly said the Sarawak government was expected to finalise the sale and purchase agreement (SPA) of a major stake in Affin Bank with LTAT within a month.
According to Abang Johari, Bank Negara had granted conditional approval, thus the SPA was expected to be finalised within a month.
Business Times has reached out to LTAT for comment.
Meanwhile, an analyst said LTAT could potentially sell its Affin Bank stake to the Sarawak government at or near the current market price.
Tradeview Capital fund manager Neoh Jia Man told Business Times that given the lack of competing bidders and LTAT's need for funds to support Boustead's restructuring, the board may not be in a strong position to demand a significant takeover premium.
"Compared to its peers, Affin Bank is not cheap at a 0.6 times book value ratio, especially considering its low return on equity of under five per cent.
"While the Sarawak government may be interested in gaining control of the bank, we believe it is unlikely to offer a price significantly higher than the current valuation," he said.
Neoh added that Affin Bank's current valuation is already elevated and has likely reflected the takeover premium.