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Author: kiasutrader   |   Latest post: Thu, 29 Mar 2018, 04:34 PM

 

Malaysia Building Society - A Boost From PFI Scheme

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MBSB's 1HFY12 income and earnings were within our expectations, accounting for 48.0% and 43.6% of our and consensus' forecasts respectively. The group saw asset quality improve on a better net impaired loans ratio of 5.6% for the quarter under review, vs 7.3% in the preceding period. However, the aggressive loans growth may prompt it to boost its deposit-taking initiatives to maintain loans sustainability moving forward. We are putting our FV under review, pending the company's results briefing on 5 Sept.
Largely boosted by Islamic banking. MBSB's 1HFY12 earnings of RM173.1m were 18.1% higher than 1HFY11, as its 2QFY12 net profit jumped 19.7% y-o-y and 17.9% q-o-q to RM93.7m. The 1HFY12 earnings were within our expectations at 50.0% of our forecast, with the growth largely contributed by improved net interest income (+18.5% y-o-y), and Islamic banking income (+78.0% y-o-y), which surged 34.9% q-o-q to RM174.9m. However, the group's 1HFY12 earnings momentum was offset by a drop in non-interest income (-42.4% y-o-y), higher operating expenses (+30.5% y-o-y) and a higher loan loss provision (+60.5% y-o-y).
Sharply better NPL ratio. MBSB's gross non-performing loans (NPL) ratio improved to 12.4% in 2Q12 from 15.4% in 1Q12 and 26.3% in the corresponding quarter last year. Meanwhile, its net NPL ratio was sharply better, improving from 2Q11's 12.2% to 5.6% in the current quarter. Loan loss coverage was also better at 90.1% for the quarter under review vs 80.7% a year ago due to the healthy allocation of collective assessment and the decline in impaired loans. MBSB's cost-to-income ratio (CIR) improved by 50bps to 20.3% in 2Q12, which we expect to edge higher to our forecast of 25.0% as the group rolls out its new core Banking System (CBS) effective from 3Q12. The CBS aims to enhance MBSB's business capabilities. Meanwhile, the group's deposits rose 47.7% y-o-y and 18.3% q-o-q, while its loan-to-deposit ratio (LDR) climbed to 119.6% from 114.5% in 1Q12. We believe the group has several initiatives in its fundraising pipeline to address the sustainability of its asset quality against loans growth. We are forecasting for an LDR of 107% this year.
Corporate loans may rebound in 2H12. We are putting our FV under review pending the company's results briefing on Wednesday (5 Sept). Our previous call on the stock was a BUY, with FV of RM2.70, pegged to a 2.6x PBV, assuming a 4% growth rate, COE of 11% and ROE of 23.7%. We expect personal financing to continue to support MBSB's sequential performance albeit likely at a normalised pace. Moving forward, we expect to see a rebound in corporate loans emanating from its disbursements targeted by the end of this year.

1H12 loans growth spike on personal loans, auto financing. Gross loans in 2Q12 expanded by a very aggressive 47.0% y-o-y and 21.7% q-o-q (vs 1Q12's 27.2% y-o-y and 13.9% q-o-q). However, net loans growth was even more robust, soaring by 65.9% y-o-y and 24.5% q-o-q (vs 1Q12's 45.9% y-o-y and 16.1% q-o-q). This was mainly due to the rapid momentum in personal loans, which spurted 132.0% y-o-y and 39.7% q-o-q (vs 1Q12's 99.2% y-o-y and 27.6% q-o-q). The group's new venture into auto financing focusing on customers in the Klang Valley is also showing promise, climbing 1437.3% from RM1.9m in 1Q12 to RM29.4m in 2Q12. However, we see signs of compression in mortgages during the quarter under review, as this segment slowed 4.1% y-o-y and 1.0% q-o-q (vs 1Q12's -2.5% y-o-y and 0.2% q-o-q). Despite the slower corporate loans growth q-o-q at 0.4% in 2Q12 vs 1.8% q-o-q in 1Q12, from a y-o-y comparison corporate loans also experienced compression, at -17.2% in 2Q12 vs -23.0% in 1Q12.
Source: OSK
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