Better cut losses now!

Maybank is in the news again. The stock surged the most in six months, gaining 7.3 per cent to RM8.10 at 9.08am but closed at RM7.90 today. It has lost 11 per cent since the takeover announcement of an Indonesian bank in late March 2008 (discussed here) which was perceived to be very expensive (bought at 4.6X book value) compared to industry's pricing. The other problem was the anticipated difficulty of raising capital for such hugh amount.

BT: BANK Negara Malaysia has stopped Malayan Banking Bhd's (Maybank) RM8.8 billion purchase of an Indonesian bank on the concern that Maybank may experience substantial losses after Indonesian authorities imposed a new takeover law. Malaysia's biggest lender received a letter from Bank Negara yesterday stating that approval for its purchase of PT Bank Internasional Indonesia TBK (BII) had been revoked. The central bank said Maybank may potentially incur material losses from share selldown and writedown of investment once the new takeover rule by Indonesia's Capital Market and Financial Institution Supervisory Agency (Bapepam) is implemented. Under the new takeover rule, a new controlling shareholder is obliged to divest to public shareholders a minimum of 20 per cent and at least 300 parties within two years after the tender offer is undertaken. Maybank told Bursa Malaysia yesterday that it had attempted to seek a waiver from Bapepam in having to comply with the ruling, but was rejected. "The bank is seeking legal and financial advice on this latest decision from Bank Negara and will further engage with Fullerton Financial Holdings Pte Ltd on the way forward," it said. In March, Maybank had entered into a share sale agreement with Fullerton to buy a 56 per stake in BII for RM4.8 billion, and later make a RM3.8 billion offer to buy the rest of BII from minority shareholders. Maybank was to pay RM4.8 billion to buy all of Sorak Financial Holdings Pte Ltd, which holds 56 per cent of BII. Sorak is owned by Singapore investment arm Temasek (75 per cent) and South Korea's Kookmin Bank (25 per cent). Indonesia's central bank has approved Maybank's acquisition of BII.

MyTake: Bank Negara's revocation of the approval for the proposed purchase came in just 2 days before the last day for the conclusion of the BII deal. The cancellation of deal may results in Maybank losing its deposit paid earlier to Fullerton of RM480m being 10% deposit down payment for BII's buy.(...why are we always in the "receiving" end?). This amount is to be compared with analyst's estimated losses of between RM200m - RM800m if the deal was to go through and the par down was to be carried out. (Note: BII's authorised share capital is about 49b shs, Maybank's purchase price of BII is Rp510, price before suspension Rp460 and recent low Rp360- big sell down tomorrrow in Indonesia?) The effect on Maybank's F/Y ending 30/6/09's net profit of RM3.235m if RM600m is used is almost 19%. Large indeed! What did the brokers in town say? AMMB(SELL TP RM7.55), Affin (ADD TP RM7.80), Alliance(Market Perform TP RM7.30), RHB(Market Perform TP RM7.04), OSK (Neutral TP RM7.80) and Kenanga(Buy TP RM10.10) Wow, with the closing price for Maybank RM7.90, does it mean the consensus TP's range has been reached? However, chart wise, it is pointing north with some resistance at RM8 and RM8.40. It will definitely go up further if the proposal to acquire Pakistani bank MCB -bought at 5.4X Book Value (discussed here) was to be aborted too. How about it Bank Negara?(refer here on Zeti and Khazanah) Also, are you okay with CIMB's foray into Indonesia?

* Going lower by the day. Crude oil is currently USD122 per barrel while CPO closed at RM2,988. However said, it will come up again latter.

* Reuters: Thailand's central bank sold dollars on the currency market today to prevent the baht falling below the 33.50 per dollar level. It seems that the effort for raising interest rate has so far failed to strengthened the baht due to political uncertainties in the country.(even the Thai Finance Minister slams its country's baht management policies) Oh, maybe Bank Negara knew this would happen if it raises interest rate and as such refrained from doing so. Good foresight Zeti!!

* Reuters: Between 2001 and 2007, the US trade deficit with China cost 2-3m American jobs.

* Starbucks admits defeat in Australia as it closes 61 out of 84 stores in the country. A whooping 73% stores!