Investment Highlights

• We maintain our BUY call on Malaysia Building Society (MBSB) an unchanged fair value (FV) of RM1.08/share supported by an ROE of 9.5% for FY22, pegging the stock to a P/BV of 0.8x.

• Valuation of the stock remains undemanding at 0.5x FY22 P/BV.

• The group reported a lower underlying net profit of RM7mil (+98.3% QoQ) in 3Q21 after excluding mod loss net of tax of RM112mil related to Pemulih financial assistance. The mod loss was largely due to personal financing borrowers taking up the Pemulih moratorium. The decline in core earnings was contributed by provisions of RM135mil taken for corporate loans and financing arising from a delay in payments. We gather that arrears of the corporate borrower have been regularised and the provisions taken will be written back in 4Q21. Besides, the provision set aside for corporate loans, the higher allowance for loan losses in 3Q21 were also due to changes in macroeconomic variables (MEVs).

• 9M21 core earnings came in at RM512mil after stripping out mod loss slipped 1.5% YoY. The decline was contributed by lower non-interest income (NOII) and higher overhead expenses.

• Cumulative earnings accounted for 65.1% of ours and 69.2% of consensus estimates. We deemed the earnings to be within expectations as we expect the credit cost to trend lower in 4Q21 owing the write-back of provision for the aforementioned corporate loans. Management has kept its credit cost guidance unchanged at 50–60bps for FY21.

• The group has approved financial assistance to 59.0% of retail borrowers and 23.0% of corporate customers. On a comforting note, for retail financing, the bulk of the assistance that has been granted to personal financing borrowers is tied to auto salary deductions. We gather that applications for the URUS programme have been low and a low percentage of its retail borrowers currently under repayment assistance would be eligible for it.

Source: AmInvest Research - 30 Nov 2021