Malaysia Building Society -
Strong base for new directions
- We maintain BUY rating on Malaysia Building Society Bhd (MBSB), with a lower fair value of RM3.60/share (from RM3.70) (cum basis) or RM2.18 (from RM2.23) on ex-rights price basis. Our earnings forecasts and fair value already reflect a possible rights issue, and is fully diluted for the previous warrants issue in FY11. This is based on a fully-diluted ROE (for previous warrants and potential imminent rights issue) of 19.7% (from 20.0%), leading to fair P/BV of 1.94x (from 1.99x).
- MBSB sustained a high level of quarterly net earnings of RM165mil (-1% QoQ, +76% YoY) in 2Q which if annualised, beat our forecasts by 8.7% and consensus’ by 16.2% for FY13F. If we are to annualise the 2Q on a straightforward basis, this means that yearly net earnings would now be RM662mil for FY13, surpassing consensus’ net earnings forecasts for next year FY14 of RM655mil.
- The company did not declare an interim dividend, which is understandable considering that it has paid a bumper dividend for the final quarter of FY12 and its ongoing plans for capital raising exercise.
- With the recent Bank Negara measures to reduce new personal loan’s tenure to a maximum of 10 years, the company indicated there will likely be a lower churn rate for its existing personal loan portfolio, given that existing borrowers may prefer to remain on longer-term tenured loan. We estimate the average tenure of its personal loan portfolio to be about 18 years.
- With the implementation of the new measures in early June, the company reckons the industry approval rate may decline by around 60%.
- Looking ahead, MBSB is exploring new growth areas in mortgage, personal loans to the private sector as well as corporate loans to counter possible effect on the growth of the personal loan industry.
- We are maintaining our personal loans growth forecast of 40% for this year and overall loans growth of 30% FY13F. Looking ahead, we have changed our personal loan growth assumption to 15% (from 35%) FY14F and to 12% (from 20%) for FY15F. Our overall loans growth assumption is now 13.2% (from 28%) FY14F and 11% (from 17%) FY15F.
- We now expect the company to target a rights issue towards year-end, from sometime in 3Q. We expect net earnings to remain intact this year and maintain buy on MBSB.
Publish date: 02/08/13