The acquisition of Warid by Mobilink is expected to create a positive impact on the earnings of Bank Alfalah, analysts said earlier yesterday.
Bank Alfalah controls 8.76% shares in Warid Telecom, according to the bank’s latest financial accounts. It is part of the Abu Dhabi Group that has sold its telecom arm in a non-cash transaction to VimpelCom, parent company of Mobilink.
While Mobilink will get 100% shareholding of Warid, the parent company of the latter will receive a 15% stake in the merged entity.
Financial statements of Bank Alfalah show its investment, which has been fully provisioned for, is recorded at Rs4.36 billion in the cellular company. The share swap will lead to a reversal in the provisions, thus increasing the earnings per share of Bank Alfalah.
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.