Malaysia: UDA to work with Bank Muamalat in developing RM1b wakaf land

PETALING JAYA (Nov 12, 2013): UDA Holdings Bhd will work with Bank Muamalat (M) Bhd to develop 40.47ha of wakaf land with a gross development value of RM1 billion.

The land, ready for development, is spread throughout the country and owned by the respective state Islamic Religious Councils.

Bank Muamalat will provide the end financing for UDA to develop the land.

UDA Holdings group managing director Ahmad Abu Bakar said implementation of development projects on the wakaf land will be based on the concept of Ijarah or leasing.

"Through this concept of Ijarah, ownership of the land to be developed remains with the state Islamic Religious Councils, and only its usage will be transferred," he told reporters after the signing of a memorandum of understanding for the development of the wakaf land between Bank Muamalat and UDA Holdings, here today.

"UDA's model and springboard for the development of wakaf land on a commercial basis using the Ijarah concept, is based on the success in developing the 3.94ha belonging to the Penang State Islamic Religious Council," Ahmad said.

He said the development of wakaf land is still being fine tuned and UDA had also received letters of offer to develop such land in Selangor.

To realise the development of wakaf land, UDA acting as the developer, will underwrite the development costs, while also being responsible for marketing the projects.

"Development of the wakaf land will help add value as well as generate optimum returns," Ahmad said.

(The Sun Daily / 12 Nov 2013)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Malaysia's Islamic banks ripe for consolidation-Bank Muamalat

KUALA LUMPUR (OCT 18, 2012) : Malaysia's Islamic banks are ready for consolidation as they seek ways to cope with rising operational costs, a top official with Bank Muamalat Malaysia Bhd said, signalling a greater acceptance in US$143.64 billion sector for M&As.

Islamic banks in the past have often been reluctant to merge, in part due to resistance from powerful shareholders who fear a loss of control while strains in global financial markets discourage risk-taking.

Islamic finance has grown in leaps and bounds to account for 23.7% of Malaysia's total banking assets although a major aspect is missing -- the development of megabanks that can issue ground-breaking products in the same way as conventional banks.

"I think consolidation is imminent and we will see a lot of Islamic banks getting together," Bank Muamalat CEO Redza Shah Abdul Wahid told Reuters.

"Costs have risen easily by 20% to 30% mainly due to the shortage of human capital and increased regulatory costs. Margins are falling and the only way to counteract this is to become bigger and more efficient," he added.

Bank Muamalat is now the target of a potential acquisition by financial group Affin Holdings Bhd, which may buy a stake from Khazanah Nasional Bhd and DRB-Hicom Bhd to create the country's fourth largest Islamic bank by assets.

DRB-Hicom holds 70% of Bank Muamalat, while the Khazanah holds the remainder. Affin, which received the greenlight from the Malaysia's central bank to begin negotiations, said the matter will conclude by end-2012.

The combined entity of Affin and Bank Muamalat would elevate both banks to a stronger market position. Affin would grow to the fourth largest Islamic bank by assets from ninth currently, the bank said last month.

"(With consolidation) we would be able to take in all these costs and do bigger deals, I think this is the way forward," Redza said.

DRB-Hicom, controlled by reclusive tycoon Syed Mokhtar Al-Bukhary, purchased a controlling stake in Bank Muamalat in 2008 with a mandate to reduce its holding to 40%.

The company last attempted to divest to Bank Islam Malaysia Bhd and Bahrain-based Al Baraka Islamic Bank.

Bank Muamalat is one of the country's remaining domestic standalone Islamic banks next to Bank Islam Malaysia Bhd, which has retained its leading position in the market.

(The Sun Daily / 19 Oct 2012)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com

Malaysia: Affin Holdings eyes stake in Bank Muamalat Malaysia

ANALYSTS have mixed views on Affin Holdings Bhd's surprise plan to buy a stake in Bank Muamalat Malaysia Bhd, one of the country's two standalone Islamic banks.

While they note that the move could strengthen Affin's foothold in the Islamic banking sector, they also don't see much synergies being derived.

Details remain scant as negotiations with Bank Muamalat's two shareholders - DRB-HICOM Bhd and Khazanah Nasional Bhd - are at an early stage.

Two days ago, Bank Negara Malaysia (BNM) gave all parties involved its permission to start the acquisition talks, which must be completed by year-end.

Talks are expected to gain momentum after the Hari Raya festive period.

Assuming a full acquisition, Affin's total assets will widen by 36 per cent to RM77 billion while its gross loan base will increase by 30 per cent. 

However, this is not expected to change the group's market ranking. Affin is the second smallest of eight banking groups in the country in terms of assets and loans.

"We see the potential acquisition of Bank Muamalat as an expansion in size and an overlap in Islamic consumer financing. Affin's strength is in Islamic consumer financing, particularly in residential property loans and hire purchase. 

"With Bank Muamalat's relatively smaller loan size, we believe that revenue synergies will be limited. Bank Muamalat in the past had high gross impaired loan ratios," banking analyst Kelvin Ong of MIDF Research said in a report yesterday.

The ratio has improved to 4.7 per cent as of March this year from a high of 8.7 per cent in December 2008, but the acquisition may result in a rise in collective assessment charge, he noted.

Ong kept his "buy" call on Affin's stock, which rose by 7 sen, or 2 per cent, yesterday to RM3.55, suggesting a potential 15.5 per cent upside from his target price of RM4.10. 

Some one million shares changed hands, triple the previous day's volume.

Bank Muamalat's strength lies in consumer financing and while it is also involved in commercial, corporate and investment banking, growth in these areas remain unexciting.

Its revenue is domestically driven and the bulk of its loans comes from residential property - they comprise about a quarter of its smallish loan base of RM9.4 billion as at end-March - and hire purchase.

"Judging from the loan book, Bank Muamalat appears to be a complementary fit for Affin, given its focus on household lending. But there does not appear to be much benefit from the funding aspect, given that Bank Muamalat's CASA (current account, savings account) ratio is quite close to Affin's," RHB Research analyst David Chong noted.

Affin's plan to buy a stake in Bank Muamalat came as a surprise to some analysts, given that it had long indicated its intention to expand regionally rather than domestically.

As early as June, it had said it was still keen on pursuing an earlier plan to buy a controlling interest in Indonesia's PT Bank Ina Perdana, but was awaiting Indonesian authorities' long-awaited new rules on shareholding limits.

Indonesia has since said single ownership in its banks will be restricted to 40 per cent, which may have put paid to Affin's Indonesian ambitions.

Still, Bank Muamalat may be attractive for Affin, given both banks' ambitions to venture into Islamic banking in China.

Bank Muamalat had last month formed a strategic collaboration with China's Bank of Shi Zui Shan in the hopes that it will have a part in the Chinese lender's plans to set up the country's first Islamic bank in the Ningxia province - where some 30 million Muslims are concentrated - in two years.

For now, it has taken on the costs for training some of the Chinese lender's staff in Islamic banking.

"We believe that Bank Muamalat's upcoming venture into China is complementary to Affin's strategic business direction, given that Affin has recently announced that it is collaborating with Bank of East Asia Ltd (BEA), to set up Islamic banking operations in China in the latter part of this year," said Alliance Research banking analyst Cheah King Yoong, who kept a "strong buy" call on Affin with a target price of RM4.42.

BEA holds a 23.5 per cent stake in Affin.

Still, pricing will be the key as to whether a sale to Affin will go through.

Tan Sri Syed Mokhtar Al-Bukhary's DRB-HICOM, which owns 70 per cent of Bank Muamalat, had twice before attempted to pare its stake - to Bank Islam Malaysia Bhd last year and to Bahrain-based Islamic lender Al Baraka before that - but was unsuccessful. 

BNM in 2008 allowed DRB-HICOM to buy the 70 per cent stake in Bank Muamalat on condition that it would eventually sell it down to 40 per cent.

Some analysts reckon that if Affin's offer is attractive enough, DRB-HICOM may give up its entire stake as the conglomerate seeks to pare down its debt.

Affin may also end up owning the smaller lender in its entirety as Khazanah, which holds the remaining 30 per cent stake, is on a mission to divest all non-core investments.

MIDF Research is not expecting Bank Muamalat to come cheap.

"Although Bank Muamalat is not listed, we do not expect it to come cheap. We believe that the PBV ratio for the acquisition will be around 1.5 times," Ong said.

Alliance's Cheah noted that one stumbling block to a deal being done could be the low return-on-equity (ROE) of Bank Muamalat, which stood at just six per cent for the financial year ended March 2012, as compared to Affin's ROE of 9.4 per cent in its last financial year.

Meanwhile, Affin late yesterday reported a 27.7 per cent rise in net profit to RM306.9 million for the first half of the year on the back of higher lending and fee-based income.

Its chairman Tan Sri Mohd Zahidi Zainuddin said in a statement that he expects the group to maintain its earnings momentum in the second half.

Bloomberg data shows that of the eight analysts who track Affin, five have "buy" calls on the stock, two are "neutral" and one with "sell". 

Affin's shares have climbed 15.2 per cent so far this year, outdoing the benchmark index's 7.8 per cent gain.

(Business Times / 18 August 2012)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Consultant-Speaker-Motivator: www.ahmad-sanusi-husain.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com