Yesterday, Kurnia Asia (KAB) announced in Bursa Malaysia that it has obtained approval from Bank Negara Malaysia (BNM) to commence preliminary negotiations with parties which are interested to acquire Kurnia Insurans (KIMB).
Valuation. As there are no further details disclosed, we maintain our previous valuation which is purely based on assumptions related to the pricing of KIMB and utilization of potential proceeds from any sale. If KIMB is sold at 2.0x PBV and the sale is all in cash, the potential cash arising from the sale of KIMB will be RM1.38bn. KAB new book value will increase from RM327.8m to RM1.02bn, translating into an equivalent book value per share of RM0.68. Since the recent insurance industry M&A activities ranged between 1.4x to 3.4x PBV, we believe our assumption of 2x PBV for KIMB is fair.
Maintain Trading Buy. We maintain Trading Buy on Kurnia with a fair value of RM0.68. The RM0.68 potential book value of KAB after a possible sale of KIMB represents a short term target for the share price. We believe the potential M&A will be able to boost up the company’s share price in the near term.
Valuation. As there are no further details disclosed, we maintain our previous valuation which is purely based on assumptions related to the pricing of KIMB and utilization of potential proceeds from any sale. If KIMB is sold at 2.0x PBV and the sale is all in cash, the potential cash arising from the sale of KIMB will be RM1.38bn. KAB new book value will increase from RM327.8m to RM1.02bn, translating into an equivalent book value per share of RM0.68. Since the recent insurance industry M&A activities ranged between 1.4x to 3.4x PBV, we believe our assumption of 2x PBV for KIMB is fair.
Maintain Trading Buy. We maintain Trading Buy on Kurnia with a fair value of RM0.68. The RM0.68 potential book value of KAB after a possible sale of KIMB represents a short term target for the share price. We believe the potential M&A will be able to boost up the company’s share price in the near term.
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