Ayala-led Bank of the Philippine Islands (BPI) announced last week that it is acquiring Robinsons Bank Corp. (RBC) of the Gokongwei Group to form the country\u2019s second largest lender in terms of assets.<\/p>\n\n\n\n
Our View:<\/strong> Based on the article, upon the completion of the merger with BPI as the surviving entity, RBC\u2019s shareholders \u2014 JGS owns 60% of RBC while RRHI owns the remaining 40% \u2014 will end up owning a 6% stake of BPI. While this would translate to a dilution of 6% to BPI\u2019s shareholders, this is likely to be offset by the increase in the bank\u2019s valuation from the infusion of RBC\u2019s assets and operation and the potential value of synergy it can offer.<\/p>\n\n\n\n Based on our back-of-the-envelope valuation (assuming a 15% discount to SECB\u2019s justified forward P\/B multiple of 0.70x \u2014 being the only mid-sized bank in our coverage), we estimate RBC\u2019s value to be around P13.5Bn.<\/p>\n\n\n\n Meanwhile, using our estimated P\/B-based TP of P111.00\/share on BPI plus RBC\u2019s value, the merger, through the 6% stake that JGS and RRHI will be obtaining, could be valuing RBC at around P30.9 Billion, equivalent to 1.37x P\/B. We, therefore, expect the immediate positive impact of the merger to be much greater for JGS and RRHI as the merger could lead to a value realization of RBC in the market plus a premium.<\/p>\n\n\n\n Considering that RBC is being discounted in both JGS and RRHI\u2019s valuations, we estimate potential upside as we factor in their stake in the bank to be around 4.7% for JGS (Target Price: P52.25)<\/strong> and 9.6% for RRHI (Target Price: P87.20)<\/strong>, respectively.<\/p>\n\n\n\n On another note, it was also mentioned that BPI is after the digital banking license of GoTyme Bank, hence the merger. Currently, the only listed bank that has a digital banking license is UBP. We expect a potential venture to digital banking to be value accretive for BPI (Target Price: P111.00\/share).<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" Here’s a commentary on an important issue or event affecting the stock market <\/p>\n","protected":false},"author":11,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1236,11],"tags":[],"class_list":["post-317823","post","type-post","status-publish","format-standard","hentry","category-free-reports","category-special-reports","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33"],"_links":{"self":[{"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/posts\/317823","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/comments?post=317823"}],"version-history":[{"count":2,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/posts\/317823\/revisions"}],"predecessor-version":[{"id":320542,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/posts\/317823\/revisions\/320542"}],"wp:attachment":[{"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/media?parent=317823"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/categories?post=317823"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/wp-json\/wp\/v2\/tags?post=317823"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}