WOOD Flash – MONETA Money Bank: proposed acquisition of AirBank and Home Credit CZ &SK

On 8 October, MONETA Money Bank announced the proposed acquisition of two Czech banks focused on retail clients, and also with operations in Slovakia. This should help MONETA Money Bank to become a leading Czech retail bank, doubling its customer base and creating the third-largest branch network in the country. The bank states that the transaction should be 10%+ EPS and DPS accretive from the first full year of operations after closing the transaction (2020E). Management also commented that the medium-term guidance is conservative and that it hopes it can deliver more.
While we like the long-term fundamentals for this transaction, we do have the following concerns: i) the transaction price is relatively high, as MONETA is paying almost CZK 20bn for entities that will have at least CZK 8.9bn in equity by mid-2019E (implied P/BV of above 2.0X BV); ii) the shareholders’ structure change needs to be addressed with the current shareholders, as once the transaction is finalised, one shareholder will have 24.5% of the bank, and we would like to understand whether this will result in a massive share overhang, or a change of corporate dynamics at the bank; and iii) there will be an intermediate drop in EPS and DPS (from 2019E net profit), with the value accretion postponed to 2020E at the earliest. These three factors may weigh negatively on the share price performance in the short term, although looking past this, we see the transaction as adding value in the long term. We will need to reflect this in our financial forecasts, in order to determine the potential impact on our valuation, price target and recommendation.