Journey to Wealth
Malaysian Building Society - FY12 profit exceeded expectations
Period 4Q12/12M12
Actual vs. Expectations The FY12 net profit of RM446.7m was higher than expected, exceeding ours and the consensus estimates by 18% and 19% respectively.
Dividends MBSB has proposed a final dividend of 9% less 25% taxation (net DPS: 6.75 sen) and a special dividend of 18% less 25% taxation (net DPS: 13.5 sen), bringing the total payout for FY12 to 24.75 sen (67% of PAT).
Key Results Highlights YoY, the 4Q12 net profit grew more than double to RM184.0m due to a higher contribution from its Islamic banking operations (mainly government servant loans) and lower allowances made on impairment losses on loans, advances and financing. This helped FY12 net profit to rise to RM447.0m, up 37%. Meanwhile, loans rose 60% to RM24.0b.
QoQ, the 4Q12 net profit increased two-fold to RM184m underpinned by the higher income from Islamic banking operations, a higher other operating income as well as from lower allowances made for impairment losses.
Outlook MBSB's balance sheet expansion story remains intact, in our view.
The group, however, needs a new capital management plan to address its relatively low core capital ratio of 6.3% as at end-December 2012.
We believe the plan could include securitisation of loans, issuance of debts and also possible capital raising exercises.
Change to Forecasts We are keeping our forecasts for now pending management guidance on FY13 KPI and its plans for any capital raisings, which could be revealed in the analysts briefing today.
Rating Maintain OUTPERFORM
Valuation The stock's valuation still looks undemanding at 6.0x PER on its FY13 EPS of 38.1 sen against its banking peers of 11.0-13.0x.
Besides, its ROE of 28.1% remains one of the highest for financial stocks.
We are maintaining our target price of RM2.70, which is pegged on 1.6x the FY13 BV of RM1.70.
Risks Potential tighter regulations by the central bank
Source: Kenanga
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