- We maintain our BUY rating on Malaysia Building Society Bhd (MBSB) with a revised fair value of RM2.40/share (vs. RM2.63/share previously). Our fair value is based on a fully diluted ROE of 17.4% (vs. 18.4% previously) for FY14, leading to revised fair P/BV of 1.7x (from 1.8x).

- MBSB’s full year net earnings for FY13 came in 1.3% above our forecast of RM589.9mil and in line with consensus’ estimate of RM595.2mil for FY13F.

- The company declared a final single-tier dividend of 5 sen. Together with the declared interim single-tier dividend of 3.33sen (ex-rights basis) earlier, the total single-tier dividend for FY13 was 8.3sen, in line with our forecast of 9.3 sen. The DRP scheme will apply to the final dividend, with more details to be released later.

- Loans growth was softer at -2.4% QoQ in 4QFY13, compared to 3.4% QoQ in 3QFY13, but this is likely due to seasonal holiday effect and in line with historical trend. Total loans growth was 18.9% for FY13, still above the company’s earlier target of 12%-15%. Personal loans growth (73% of total loans) was relatively flat at 0.1% QoQ in 4QFY13 (3QFY13: 2.9% QoQ), again due mainly to the slower holiday season. Total personal loans growth was 31.4% in FY13 (FY12: 104.1%), slightly below our forecast of 40% YoY for FY13F.

- We estimate net interest margin of 4.92% in 4QFY13, (3QFY13: 4.29%), well above the company’s target of 4.00% for FY13F and our forecast of 4.17% FY13F.

- Gross impaired loans improved significantly with a 39.7% QoQ drop in 4QFY13, due partly to lower NPLs, better recoveries and higher write-offs. Thus, gross impaired loans ratio is also much lower at 5.2% in 4QFY13, compared to 8.4% in 3QFY13. Loan loss cover had also strengthened to 98.2% in 4QFY13 (3QFY13: 93.0%).

- Collective assessment rate continued to increase to 4.09% in 4QFY13, from 3.59% in 3QFY13. We believe this is due to ongoing reclassification of impaired loans from 6-month basis to 3-month basis. Despite this, credit costs were at a more normalised level of 112bps in 4QFY13, compared to 143bps in 3QFY13.

- We have revised net earnings downwards by 6.5% for FY14F to take into account a possible slower growth environment ahead within the banking sector. We maintain our stance pending further details from the briefing. 

Source: AmeSecurities