Period     1QFY13/3MFY13

Actual vs. Expectations     The 1Q13 net profit of RM166m was slightly above ours and the market expectations, accounting for 31% and 32% of the house and consensus estimates respectively.

Dividends     No dividends were announced for the quarter.

Key Results Highlights     YoY, the net profit doubled, mainly contributed by the Islamic banking operations (i.e. personal financing) and lower allowance for impairment losses, advances and financing due to a write-back. The gross income from personal financing improved due to the growth of the personal financing portfolio. Net loans grew 51% to RM27.0b while NPL stood at 3.4% as at end-March 2013.

QoQ, the net profit slid 9.5% as 4Q12 profit included a RM55m gain from the disposal of property development. Excluding the gain on a recurring basis, 1Q13 net profit would have increased by 30% on the back of higher income from the Islamic banking operation.

Outlook     The group is planning to address its relatively low core capital ratio, which may include the securitisation of loans, issuance of debts and also possible capital raising exercises.

This will be announced once its plans are finalised and approved by the board.

Change to Forecasts     We are leaving unchanged.

Rating    Maintain OUTPERFORM

Valuation    At current price, the stock offers a total return of 26%.

Risks      We have rolled forward our valuation to FY14 BVPS, valuing MBSB at 1.7x FY14E. Accordingly, our target price has been revised upward to RM3.40 from RM2.70 previously.

Potential tighter regulations by the central bank.

Source: Kenanga