News   The group has proposed the acquisition of an office building project to be developed for RM239.2m in cash.  

The proposed acquisition project relates to Tower 3 of PJ Sentral Garden City, where a 'Grade A' strata
office building will be built comprising between 27 to 30 floors of office space, four basement car park
levels and one service floor with a total net let table area of 281,455 square feet.

Comments   We understand that the group currently has a staff force of about 700 employees who are housed in two office premises located in Damansara Heights, namely Menara MBSB and Menara I&P2, with a combined NLA of 118,100 square feet.

However, with the company's expansion plan, and in view of its increasing staff force in the near
future, the proposed acquisition will enable the group to house all its subsidiaries and staffs under one roof to enhance operating efficiencies.

In addition, the new building will also house a newsignature branch and larger information technology data centre to cater to the group's new core banking platform.

Outlook   Meanwhile, MBSB needs a new capital management plan to address its relatively low Core-Capital Ratio of 6.0% as at end-Sep12.

We believe the plan could include corporate exercises such as securitisation of loans and possible equity capital raising.  We reckon that such a plan could be unveiled by the management by early next year.

Change to Forecasts No change to our earnings estimates.

Rating  Maintain OUTPERFORM

The stock's valuation still looks undemanding at 6.0x PER to its FY13 EPS of 38.1 sen against its banking peers of 11.0x-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.

Risks   Potential tighter regulations by BNM.

Source: Kenanga