Analysts said earlier yesterday that Mobilink’s acquisition of Warid is expected to positively impact Bank Alfalah’s earnings.
Bank Alfalah controls 8.76% of Warid Telecom’s shares, according to its latest financial accounts. It is part of the Abu Dhabi Group, which sold its telecom arm in a non-cash transaction to VimpelCom, the parent company of Mobilink.
While Mobilink will receive a 100% shareholding in Warid, the latter’s parent company will receive a 15% stake in the merged entity.
Bank Alfalah’s financial statements show its fully provisioned investment in the cellular company at Rs4.36 billion. The share swap will reverse the provisions, thus increasing Bank Alfalah’s earnings per share.
According to Topline Securities analyst Hamza Raza, the deal values Warid’s Enterprise Value (EV) – a technical term for the current market value of a business – at $970 million. “Thus, the value for Bank Alfalah – which we believe will have a 1.3% stake in the merged entity – will be $57 million or Rs5.9 billion,” Raza said.
With the EPS impact of Rs1.90 in the case of reversal of total provisions, he emphasised that the bank management has not commented on the amount of actual reversal and its accounting treatment.
In a separate research note to its clients, AKD Securities also drew up multiple scenarios on the basis of different price-to-book ratios. The amount of provisioning reversal will depend on the valuation of the two entities involved, the note said, adding the EPS impact for Bank Alfalah can range from Rs0.29 to Rs1.90.
