- We maintain HOLD on Malaysia Building Society Bhd (MBSB), with an unchanged fully-diluted fair value  of RM2.60/share. Our fair value is for ex-warrants. Our fair value is based on an unchanged estimated adjusted (for warrants) FY13F ROE of 19.8% FY13F, leading to a fair P/BV of 2.0x.

- At MBSB's briefing, the company alluded to a loans growth target for FY13 of 20% to 25%, after having achieved a 50% in FY12. 

- Net interest margin is expected to range around 4% for FY13F, although there was an increase in NIM of 16bps to 4.92% in 4QFY12 from 3.76% in 3QFY12. The company attributed the increase to an effectively shorter term tenure for its personal loans.     

- Loan loss provision was low, with credit cost of only 17bps in 4QFY12, attributed to seasonally lower gross loans disbursed towards year-end. This led to a lesser collective assessment charge. Besides this, there were also some write-backs in relation to some legacy impaired loans.

- There was an uptick in gross NPL on a QoQ basis, by 6.3% to RM3.0bil 4QFY12 from RM2.8bil in 3QFY12. This was attributed to seasoning of its older mortgage loans portfolio which was approved prior to 2009 and which were mostly then targeted at the low mass market segment. (The company has since then shifted focus on mortgage to the mass and mass premium segment). There was also the seasonally slower year-end effect on repayment, with certain borrowers constrained by school opening and other annual expenses. We believe this will not be a trend.   

- The company has declared a generous 18 sen GDPS (net RM0.135 sen), on top of the final dividend of 9 sen (net RM0.0675 ), partly to utilise its Section 108 tax credit.   

- MBSB expects the main focus in FY13 to be on enhancing its capabilities, with the primary focus  on improving efficiency and productivity. With the strong earnings and bumper dividend, we expect the share price to be sustained.

Source: AmeSecurities