Commonwealth Bank of Australia (ASX: CBA) has agreed to dispose of its 80% stake in Indonesian life insurance business PT Commonwealth Life to FWD Group for the total consideration of A$426 Mn. As per the deal, its Indonesian banking business i.e., PT Bank Commonwealth (PTBC) will enter xinto a 15-year life insurance distribution partnership with FWD Group wherein PTBC will continue to earn income from the distribution of life insurance products.
The total consideration for the Transaction exhibits a multiple of 3.0x PTCL’s book value at 30 June 2018 and 16.6x PTCL’s normalized net profit after tax (NPAT) for the twelve months to 30 June 2018. Upon the completion, the Transaction is expected to result in a post-tax gain on sale of approximately $140 million and a gain of 7 basis points (bps) to CBA’s Common Equity Tier 1 (CET1) ratio as at 30 June 2018. However, the completion of the sale is subjected to regulatory approvals in Indonesia. Further, the management believes that the aforesaid deal is aligned with the CBA’s strategy to focus on its core banking businesses and to create a simpler and better banking to its customers and is expected to complete in the first half of the calendar year 2019.
The overall performance of the company since its inception is 58.28%. The one year, 5 years and 10 years performance of the company is -14.42%, -9.44% and 69.10%, respectively. The company made a net profit of $9,233 million on a cash basis which got reduced by 4.8% as compared to FY17. There was a decrease in the earnings per share of the company by 6.2% as compared to the previous financial year. There was an increase in operating income by 2.6% as compared to the last financial year. The return on equity came in at 14.1% in FY18. The total assets available with the company is $975,165 million and the total liabilities of $907,305 million. This indicates that the company can clear its long-term obligations. It is also important to note that 75% of the group assets of the company are the loans given to the customers. The remaining assets are investments, trading of securities and the cash and other liquid assets. The total shareholder’s equity is worth $67,860 million. The company made a net cash inflow of $16,570 million which is before changes in operating assets and liabilities. The major cash outflow was due to the payment of interest, expense, and tax. The company has made investments in purchase of property, plant, and equipment, purchased intangible items, payment in regard to the investments in associates and joint ventures. The net cash used in the investing activities was $1,002 million. The net cash outflow from the financing activities was $934 million. Under financing activities, the major cash outflow was due to a payment of dividend, redemption of the issued securities and redemption of the loan capital. As of 30 June 2018, the company had cash and cash equivalent $23,005 million.
The current market price of the share was A$66.895 (AEST 2:27 pm) with a market capitalization of A$119.2 billion and a PE ratio of 12.6x as on October 23, 2018. As per the chart, we see that the moving average convergence and divergence line (MACD line) as cut the signal line from the below on 22 October 2018 and is moving in the upward direction indicating the prices may go bullish.
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