-  We maintain HOLD on Malaysia Building Society Bhd (MBSB), with a revised fully-diluted fair value of RM2.60/share (vs. RM2.40/share previously). Our fair value is for ex-warrants. We have rolled forward our base year to FY13F. Our fair value is based on an estimated adjusted (for rights and warrants) FY13F ROE of 19.8% FY13F (previously 22.4% FY12F), leading to a fair P/BV of 2.0x (vs. 2.2x previously).

-  MBSB posted a large 104.1% increase in net earnings to RM183.6mil in 4QFY12 (3QFY12: RM90mil), thus leading to total net earnings of RM446.7mil for FY12. Net earnings are thus 18.8% above our forecast and 18.6% above consensus' RM394mil FY12F. The main positive surprise came from the net interest income line, which was 22% above our forecasts.

-  Further, there was also a positive surprise from a  bumper final and special dividend. The company declared a final dividend of RM0.09/share less 25% tax (net DPS: RM0.0675) and another special dividend of RM0.18/share (net DPS: RM0.135). Thus, together with the interim GDPS already declared earlier of RM0.06 (net DPS: RM0.045), total GDPS for FY12 amounted to RM0.33 (net DPS: RM0.2475). This means a dividend payout ratio of 69%, way above the company's target of 30%. 

-  Total loans growth was at 50.8% in FY12, above our forecast of 17.4%. Personal loans expanded 104.1% in FY12. With this, personal loans contributed 66.3% of total loans in 4QFY12 (3QFY12: 65.0%, 4QFY11: 49%). 

-  We estimate an increase of 12bps QoQ in net interest margin, to 4.58% in 4QFY12. NIM for FY12 was 33bps higher YoY, at an estimated 4.56% vs. FY11's 4.23%. Thus, NIM came in well above the company's 4.00% target for FY12F and our forecast of 3.79% FY12F.

-  Gross impaired loans however recorded an uptick of 6.3% QoQ to RM3.0bil 4QFY12, from RM2.8bil in 3QFY12. This came largely from higher new impaired loans of RM443.4mil in 4QFY12 compared with RM167.6mil in 3QFY12. Overall gross impaired loans ratio rose to 11.2% in 4QFY12 from 10.9% in 3QFY12. Loan loss cover was lowered to 86.2% in 4QFY12, from 93.9% in 3QFY12.

-  FY12 represents another bumper year for MBSB in terms of net earnings and dividend, with a strong loans growth and being one of the few financial institutions that generated higher NIM on YoY basis.  With the strong earnings and bumper dividend, we expect share price to sustain.   

Source: AmeSecurities