KUALA LUMPUR (Oct 11): Public Bank Bhd (KL:PBBANK) shares fell to their lowest level in two months on Friday, as investors expressed concerns over potential share overhang from plans of the family of its late founder Tan Sri Teh Hong Piow to trim their stake.
Public Bank's shares dropped by as much as 27 sen, or 6%, to RM4.30, the biggest single day decline since Nov 30, 2020, after trading resumed on Friday morning, translating to a market capitalisation of RM83.6 billion.
The counter saw some 145 million shares change hands, making it the top mover of the day on Bursa Malaysia.
On Thursday, the family of the late Teh announced plans to undertake a restricted offer for sale (ROFS) of shares to eligible employees, investors and directors, which would gradually reduce their shareholding in Public Bank to 10% over five years.
Currently, the estate of the late Teh holds a 23.41% stake in the bank, of which 22.77% is held via Consolidated Teh Holdings (as at Feb 29), based on the bank’s latest annual report.
Consolidated Teh Holdings is the private vehicle of the Teh family.
On the same day, Public Bank also announced the acquisition of a 44.15% stake in insurer LPI Capital Bhd (KL:LPI) for RM1.72 billion, or RM9.80 per share, from the family of the late Teh.
The stake includes a 1.41% direct interest and 42.74% held through Consolidated Teh Holdings.
A total of 16 out of 20 analysts covering Public Bank were bullish on the LPI deal and have maintained a "buy" call, with a 12-month target price of RM5.16, according to Bloomberg data. However, the market’s current concern revolves around the ROFS, analysts noted.
"There is still uncertainty regarding the ROFS and whether it could be priced well below current levels," Kenanga Research banking analyst Clement Chua told The Edge.
The sentiment is expected to persist for a few more days, he added. "Some investors might see this as an opportunity to accumulate shares."
Similarly, several fund managers shared the same view.
"I believe the main reason [for the share decline] is related to the ROFS, which will see the Teh family trimming down their shares.
However, the impact of the price overhang should be less severe than expected, as the ROFS will be spread out over a five-year period," said Khoo Zing Sheng, fund manager at Pheim Asset Management.
Another fund manager, who declined to be named, pointed out that the current situation at Public Bank could be similar to the sell down at AMMB Holdings Bhd (KL:AMBANK) in March, after Australia & New Zealand Banking Group Ltd (ANZ) disposed of a 16.5% stake in AMMB.
"But, it took only a short period for the stock to bounce back," reminded the fund manager.
The Teh family will need to offer 2.6 billion shares for the ROFS, based on Public Bank's issued share capital of 19.4 billion shares, according to CIMB Securities. The research house also flagged the potential share overhang from this corporate exercise.
However, Kenanga Research noted that the release of 2.6 billion shares over the next five years, equating to an average disposal of 40 million shares per month, is unlikely to pose a major concern, as the bank’s shares have seen an average monthly trading volume of 310 million over the past five years.
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