RHB Expands Abroad With Philippine Partner Talks: Southeast Asia

RHB Investment Bank Bhd., a unit of Malaysia’s fourth-largest lender, said it’s in talks with potential partners in the Philippines to further its push into Southeast Asia’s fast-growing economies and boost revenue.

“We’ll start with a joint venture first, with a preemptive right to buy out the joint venture probably a few years down the road,” Mike Chan, managing director of the Kuala Lumpur-based company, said in an interview.

The investment bank, owned by RHB Capital Bhd., wants to increase overseas revenue to as much as 40 percent by 2017, from 25 percent now, Chan said. The group has expanded its presence in Singapore and Thailand, and gained footholds in countries including Indonesia after buying OSK Investment Bank Bhd. last year for 1.95 billion ringgit ($617 million).

RHB is following bigger Malaysian lenders Malayan Banking Bhd. and CIMB Group Holdings Bhd. in extending their regional reach for growth. Maybank bought Singapore brokerage Kim Eng Holdings Ltd. for S$1.79 billion ($1.4 billion) in 2011, and CIMB acquired most of Royal Bank of Scotland Group Plc’s Asia-Pacific investment banking interests last year.

“We are going to shift the playground from Malaysia to Southeast Asia,” Chan, who was appointed managing director in September, said in the Oct. 14 interview.

In Indonesia, the bank wants to complete its planned acquisition of a stake in PT Bank Mestika Dharma, while increasing its own treasury services and broking platform, he said. RHB Investment wants to extend its presence in Singapore and Thailand with more of its own banking services, Chan said, adding that he would also like to expand in China.

‘Relatively Untapped’

RHB shares closed 3.3 percent higher at 7.82 ringgit in Kuala Lumpur today, their steepest increase since October 2011. The stock was the second-biggest gainer on the benchmark FTSE Bursa Malaysia KLCI Index.

Winson Ng, an analyst at CIMB, named the stock as his top Malaysian banking pick on its regional expansion plan, dislodging Maybank. He has a price target of 11.30 ringgit and an outperform rating, meaning RHB is expected to show positive total returns of at least 10 percent over the next 12 months, according to a report from CIMB today.

“It’s a right move to expand in the Asean countries,” said Jason Chong, chief investment officer at Manulife Asset Management Services Bhd. in Kuala Lumpur, who oversees $1 billion. “The Philippines is still relatively untapped.”

Asean refers to the 10-member Association of Southeast Asian Nations, and the Philippines is the missing link among the region’s biggest economies in terms of RHB’s investment banking operations.

The Philippines won a debt rating upgrade from Moody’s Investors Service this month, completing the nation’s ascent to investment rank as President Benigno Aquino leads a growth resurgence that is outpacing the rest of the region.

Kam’s Vision

RHB wants to be among Southeast Asia’s top eight banks for handling acquisitions in the next two years, RHB Capital Managing Director Kellee Kam said in an interview in April. The company was ranked 14th in 2012 after managing $8.8 billion of deals, according to data compiled by Bloomberg.

The OSK Investment acquisition saw the company overtake CIMB to become Malaysia’s largest equities broker by trading volume, according to stock exchange data. The purchase broadened the group’s distribution network, enabling RHB to better manage deals, Chan said.

RHB expects to handle at least 10 initial public offerings next year, said Chan, who is currently managing a Kuala Lumpur share sale for Karex Bhd., the world’s biggest condom maker.

Syndicated Loans

RHB was Malaysia’s biggest mandated arranger for syndicated loans last year with a 19.2 percent market share, according to Bloomberg underwriter rankings. It has slipped this year to sixth place, handling 6.6 percent of transactions, the data show.

“In terms of syndicated loans, we are a bit cautious on the credits that are coming to the market,” Chan said. “We have actually agreed to enter into a few large deals but these deals won’t come on stream until early next year.”

RHB is the third-biggest arranger of Malaysian corporate bonds this year, with 7.3 billion ringgit of deals, after CIMB and AMMB Holdings Bhd., according to data compiled by Bloomberg.

The bank is in talks with companies in Indonesia and Thailand to arrange ringgit-denominated debt sales, Angus Salim Amran, its head of financial markets, said in an Oct. 14 interview in Kuala Lumpur.

“Part and parcel of the regionalization initiative is to bring more issuers to tap the ringgit market as well as us looking to distribute more ringgit bonds into the region,” Angus said. “What we’ve seen is issuers looking to tap our market as it remains relatively resilient to capital outflows.”

RHB handled 750 million ringgit worth of Islamic bond sales for Singapore-listed plantation company Golden Agri-Resources Ltd. this year, according to data compiled by Bloomberg.

“We do have some large corporate issuances looking to tap the market before the year is out,” Angus said.

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