20051024 Hwang DBS Daily Focus

Highlights
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> CAHB approved to negotiate for SBB - Maintain Overweight
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> Commerce Asset (CAHB MK) made a surprise move with its plan to commence
> merger discussions with shareholders of Southern Bank (SBKF MK). We view
> this as a possible hostile takeover of SBKF, suggesting the start of the
> 2nd round market-driven consolidation. If successful, this acquisition is
> synergistic to CAHB because SBKF has the retail customer base, which
> compliments CAHB's corporate customers. However, price remains the key
> issue and it is still too early to conclude if it would be a fair deal for
> CAHB since CAHB has just begun negotiating with SBKF shareholders. We
> believe that it would not be easy for CAHB to gain control or to trigger a
> general offer given the potential resistance from SBKF's CEO Dato' Tan. As
> such, a hefty price tag and speculative interest on SBKF is expected.
> Hence, we upgrade SBB to Trading Buy. Meanwhile we maintain our Hold call
> on CAHB.