• Get nod for talks to become a full-fledged Islamic bank. To recap, MBSB has received a letter from BNM on 21 Dec 16 which states that BNM has no objection in principle for MBSB to commence negotiations with the existing shareholders of Asian Finance Bank Berhad (AFB) namely Qatar Islamic Bank, RUSB Investment Bank Inc, Tadhamon International Islamic Bank and Financial Assets Bahrain WLL for a proposed merger of MBSB and AFB. The merger talk with AFB will be for a period of 6 months from 21 Dec 16. AFB was incorporated on 28 Nov 05. The shareholders of AFB are Middle Eastern financial institutions, Qatar Islamic Bank (66.67%), RUSD Investment Bank Inc (16.67%), Tadhamon International Islamic Bank (10%) and Financial Assets Bahrain W.L.L (6.67%).
   
• Poised for a triangle breakout. MBSB’s share price inched up 0.5 sen yesterday to finish at RM0.915. Trading volume surged 2.5x the 20-day average, clocking in 7.57m shares for the day. Chart-wise, MBSB has been on a tight sideways consolidation since BNM announcement, with share price moving within a low of RM0.89 (21 Dec 2016) to as high as RM0.935 (22 Dec 2016).
   
• However, after engaging in a 4-month consolidation, MBSB is poised for a symmetrical triangle breakout soon, with share prices closed above key SMAs and supported by upticks in technical indicators. Valuations also remain undemanding as MBSB is trading at 0.79x P/B, which is 32% below its nearest peer, RCECAP’s P/B of 1.16x and 48% discount against its historical 10-year trough of 1.5x.
   
• Hence, a strong breakout above RM0.935 (downtrend line) will push share prices towards RM0.96 (26 Oct high) and RM1.00 psychological barrier before reaching our LT objective at RM1.07 (breakout target). Key supports are RM0.90 and RM0.87 (30 Nov low). Cut loss at RM0.86.

Source: Hong Leong Investment Bank Research - 5 Jan 2017