Hong Leong to acquire PBB???

http://stocktube.blogspot.com/2009/10/hong-leong-to-acquire-public-bank.html

I was reading the above post over at Stocktube - my dad sent it over actually. He owns this stock and wanted an opinion. Well, here's my 2 cents:

The author asks whether its a matter of time for HLB to buy PBB. The primary basis for this are certain rumours over PBB's founder Teh Hong Piow's health. A secondary basis is the company's management style and prudence.

Well, rumours are hard to assess. The first question I would ask is "who's your source"?

On the risk of holding the stock:
In an M&A situation, the purchaser would post a purchase price - a valuation, that would give value to shareholders. This can be between 5-50% on top of the trading price of a specific day. Otherwise, why would a shareholder want to sell his stake? Overall, I dont see a problem on holding the stock.

The author asserts that the basis of risk is the lack of a succession plan and, perhaps, poor employee morale / high dissatisfaction. The latter is not surprising in any stretch of the imagination but its neither here nor there - Malaysian companies are not known for innovative management.

Now the lack of succession plan is not something I'd worry about though admittedly the lack transparency those cause worry. The founder would have many captains capable of rising to the occasion - especially those careerists who've stayed with the bank for the majority of their lives. It would be business as usual for the most of them as it is unlikely for any dissenting voices to remain for long.

Admittedly, I do not know much about the internal workings of this bank but any company that's known to be "prudent" wont stray far from the line. We may actually see Public Bank buying Hong Leong instead - usually the over-prudent monarch would be replaced with more progressive minded heirs.

I would expect that Public bank shares would drop a little if news of Mr Teh's health comes out but not by much. The fundamentals of Public Bank are still very strong though intensely boring. But boring is good in the long term, it means the performance and thus share price wont have much surprises in store.

And what has Amber Chia (the close model friend) have anything to do with Public Bank's performance??? Is the author saying that Amber is a major recipient in Mr Teh's will??? I suppose if Mr Teh gave the majority of his stock to Amber, THAT would be news. I would then pay attention to what happens in the immediate term after that announcement to see what Amber's direction for the company would be. THAT would be exciting! And for Public Bank, a welcome change of pace. :D

Market Cap (RM):
HLB = 12.2 Billion (26-10-09)
PBB = 32.37 Billion (25 Feb 09)
MBB = 20 B (approx. 12-03-09)

With the above numbers, who do you think is going to acquire someone? It is not impossible for a David and Goliath situation - it has happened before in multiple industries such as finance and technology. But its really unlikely at this time, perhaps during the peak periods of the financial world but not in the immediate 6 month term.

I have no calls on PBB as I do not know enough about it. But fundamentals of this company is strong despite the global financial crisis. And they have managed to maintain disciplined good practices in their mortgages and loans - allowing them to ride out most of the sector's problems.

A Long Term View: Malaysia vs Indonesia

I was reading this article at the Malaysian Insider:
The View from Middle Malaysia

Karin Raslan makes a very important and significant point regarding Indonesia:

We’re so used to it being the sick man of South-east Asia... But what emerged from the financial crisis is the importance of critical mass and size. Indonesia has that and investors are realising that they have to be there for future growth.

Malaysia's present course of upholding the NEP is disaster in the long term. Malay rights will cause Malaysia to become extraordinarily uncompetitive against its huge neighbour in the long term.

Today we see Indonesians migrating illegally to Malaysia, there may come a day where Malaysians migrate to Indonesia illegally.

Perhaps our Malay brothers should push for our education to be in Bahasa Indonesia rather than Bahasa Malaysia.