DBS

DBS: UOB kay Hian sees a high probability that DBS’s purchase of a 67.4% stake in Bank Danamon from Temasek would be allowed to proceed as there is no change in effective ownership in this ‘left hand to right hand’ transfer. Under existing takeover rules, a share ownership of more than 50% will trigger a mandatory tender offer. A change of controlling shareholder would also trigger a MTO. However, imposing a limit on single ownership creates a cumbersome process of selling down to the specific limit post- MTO. Overall, house assess the probability of DBS proceeding with the MTO to be more than 50%. House maintains DBS at BUY, TP: $19.50) based on P/B of 1.5x and adjusted for dilution from the acquisition of BDMN. TP would be higher at $21.70 if the acquisition does not proceed and the penalty from dilution to ROE is removed.