Journey to Wealth

Malaysian Building Society - A higher 2Q12

kiasutrader
Publish date: Mon, 03 Sep 2012, 10:46 AM
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Period  2Q12/1H12

Actual vs.Expectations  Within expectations. MBSB reported 1H12 net profit of RM173.1m (46% of our estimate and 44% that of the consensus).

Dividends           Interim gross dividend of 6 sen per share.

Key Result Highlights
2Q12 revenue of RM235.9m was up +35% YoY and +25% QoQ, driven by higher loans of RM21.9b (+66% YoY, +25% QoQ) with an estimated 4.2% NIM (vs. FY11's 4.66% and 1Q12's 4.6%).

MBSB had an aggressive PF-I campaign during the period of January-April 2012 with the aim to capture market share from its peers. The campaign successfully disbursed RM6.8b of new PF-I loans, which helped MBSB's personal financing loans segment grew strongly by +78% YTD, even while its mortgages and corporate loans segments remained flat.

However, the price cutting strategy and promotion on the transfer packages resulted in lower fee-based incomes, which fell 13.8% QoQ to RM24.1m.

Nonetheless, the 2Q12 PAT of RM93.7m (+17.9% QoQ) was strong. We expect the earnings momentum to remain strong heading into 2H12.

Outlook
We believe the group's total loan disbursement target of RM8.0b PF-I loan in 2012 is highly achievable, as 1H's RM6.8b loan disbursement already made up 85% of its full year target. Hence, its balance sheet expansion story remains intact.

Management is guiding for NIM to remain above 4%.

However, the management did not provide any guidance on the fee-based income. As such, lower fee-incomes as a result from aggressive promotion could be a risk to our earnings estimates.

Change to Forecasts       No change in our earnings estimates.

Rating   Maintain OUTPERFORM
The stock's valuation still looks undemanding at 6.0x to its FY13 EPS of 38.1 sen against its banking peers of 11-13.0x. Its ROE of 28.1% remains one of the highest for financial stocks.

Valuation            Maintaining our target price at RM2.70 based on a targeted P/BV of 1.6x over its FY13 BV of RM1.70.

At current level, the stock offers a potential capital upside of 17%. Coupled with an additional dividend yield of 2.5%, this will bring the potential total return to approximately 20% over the next 12 months.

Risks      Potential tighter regulation by BNM.

Source: Kenanga
MBSB (1171)
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