As expected
The Boost-RHB consortium was expectedly awarded a digital bank
license, having been among the frontrunners during the bidding process
in our view. While earnings impact is immaterial in the initial years, the
digital bank license offers yet another value creation avenue for Axiata’s
digital businesses. Maintain BUY with an unchanged MYR4.50 TP (SOPbased).
Digital bank license in the bag
The 60:40 consortium between Boost (effective 75% subsidiary of Axiata)
and RHB Bank (RHB MK, BUY, CP: MYR6.25, TP: MYR7.10) has been
awarded a digital bank license from Bank Negara. Initial capital
requirement for the digital bank is MYR100m (Boost’s portion would be
MYR60m), rising to MYR300m after 3 years. Bank Negara expects these
new digital banks to begin operations in mid-2023.
Boost to drive business
As evident from the shareholding split, we expect Boost to take the lead
in the digital bank. Boost is among the top 3 e-wallets in Malaysia, and
already has a credit business (having disbursed c. MYR900m of loans) and
the associated digital processes/infrastructure in place. With a digital
bank, the overall cost of funding would be further lowered in our view.
RHB meanwhile would offer the regulatory and back-end expertise
pertaining to banking.
Earnings immaterial initially
We believe the digital bank is unlikely to contribute materially to
earnings in the initial years. Our earnings forecasts and MYR4.50 TP
(derived from a sum-of-parts with each op-co valued on DCF) are
unchanged. Management had prior the digital bank license award,
targeted for Boost to potentially turn EBITDA-positive by end-2022.
Longer term, Axiata intends to monetise its digital businesses.