- We downgrade our rating on Malaysia Building Society Bhd (MBSB) to HOLD from BUY, with an unchanged fair value of RM2.40/share. Our fair value is based on a fully diluted adjusted-ex-rights ROE of 17.4% for FY14F, leading to revised fair P/BV of 1.7x.
- Our downgrade is due to the recent upward movement in MBSB’s share price. This has reduced the upside to our fair value (Note that our in-house criterion for buy rating is a minimum upside of at least 15% to fair value).
- MBSB announced that the issue price for the new MBSB shares to be issued pursuant to the first Dividend Reinvestment Plan (DRP) applicable to the single-tier final cash dividend for FY13 of 5 sen per MBSB share, has been fixed yesterday (Price Fixing Date) at RM2.03 per new MBSB Share (Issue Price).
- The Issue Price represents a discount of approximately 9.78% to the ex-dividend volume weighted average market price (VWAP) of MBSB Share of RM2.25.
- The VWAP of MBSB of RM2.25 was arrived at after taking into consideration:- (a) the 5-day VWAP of RM2.30 per MBSB share up to and including 21 April 2014, being the last trading day prior to the Price Fixing Date; and (b) a dividend adjustment of 5 sen to the 5-day VWAP of MBSB share.
- The new MBSB shares arising from the first is expected to be listed in early June 2014.
- The press also recently reported the company as saying that loans growth will likely slow down to 10% to 12% this year. We are maintaining our loans growth forecast of 6.8% for FY14F (FY13: 18.9%).
- The higher overall loans growth target by the company, compared to our projection, may be due to stronger corporate loans growth. We expect corporate loans (10% of total gross loans) growth to be higher at 16% in FY14F (FY13F: -17.0%). The company had earlier indicated that it will focus on the corporate segment for growth ahead. It believes that its key competitive edge is its relatively fast turnaround time within this segment.
- In addition, the press also reported that the company expects personal loans growth to slow down to 3% to 4% this year. This is lower than our forecast for personal loans growth (73% of total loans) of 6.0% for FY14F (FY13: 31.4%). All in, we maintain our forecast for now as we expect slower personal loans growth to be compensated by possibly stronger corporate loans growth.
Source: AmeSecurities
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