MIDF Sector Research
Malaysia Building Society Bhd - Higher ECL a Major Drag
sectoranalyst
Publish date: Tue, 03 Sep 2019, 02:39 PM
INVESTMENT HIGHLIGHTS
- Below expectations as expected credit losses came in higher than expected
- Reaping advantage of banking license. Treasury income moderated income pressure
- Tepid loans growth due to asset mix reorganization
- Business plan on track with new products expected in FY19
- Revising FY19 and FY20 earnings downwards to take into account the higher ECL
- Downgrade to NEUTRAL with revised RM0.93 (from RM1.25)
Did not meet expectations. MBSB posted its 1HFY19 net profit at 28.4% and 28.7% of our and consensus’ full year estimate respectively. The reason for the variance was due to higher than expected provisions, which continued from last quarter. However, we should note that pre provisioning operating profit (PPOP) was within our expectations at 45.5% of our full year estimate.
Higher provisions a major drag. The expected credit losses (ECL) for 1HFY19 was RM245.4m. Comparatively, it was a net write back of RM8.0m in 1HFY18 due to one-off write back in 1QFY18 as it migrated to MFRS 9. As expected, ECL actually improved for 2QFY19, by - 31.8%yoy and -39.6%qoq. The higher ECL in 1QFY19 was due to timing of payments by its borrowers, which automatically triggered the provisions which is expected to be recovered in subsequent quarters.
Legacy affected GIF ratio. Gross impaired financing (GIF) ratio rose +18bp yoy to 5.65%. We understand that this was due to conventional legacy loans. However, at bank level, GIF ratio was at 2.74%.
Treasury income moderated income pressure. Total income declined marginally by -0.6%yoy. Islamic banking income and net interest income fell -2.2%yoy and -34.2%yoy. The decline in net interest income is understandable as MBSB moves towards becoming a full fledge Islamic bank. The pressure on Islamic banking income was due to tepid gross financing growth and the high funding cost. However, the pressure on income was moderated by the rise in treasury income. As a result, other income went up to RM72.5m. We opine that MBSB is reaping the advantage of securing a banking license last year.
Source: MIDF Research - 3 Sept 2019
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Discussions
Be the first to like this. Showing 5 of 5 comments
Calvin enough la stop promoting MBSB, no body will give u a damn.... lol lmao.... u buy urself la no need convince ppl to buy
2019-09-04 10:35
Posted by calvintaneng > Sep 5, 2019 12:12 AM | Report Abuse X
Posted by (HK1997 again) Philip > Sep 5, 2019 12:06 AM | Report Abuse
Pchem collapsing? Don't make me laugh. 50 billion dollar company with 4.3 billion in revenue and 1.1 billion in profit AFTER TAX and a horde of cash behind it.
I am just enjoying collecting my 11 +18 cents dividend since February when I started buying at 8.15 collecting my 11 +18 cents dividend
SO?
COST OF PURCHASE Rm8.15
Less 29 sen dividend = Rm7.86
Price now Rm6.83
SO REAL LOST OF Rm1.03 PER SHARE
IS THIS PHILIP IN HIS RIGHT MIND?
YOU BETTER DON'T LEAD SORCHAI TO HOLLAND HOR!
05/09/2019 12:14 AM
2019-09-05 07:58
Posted by (HK1997 again) Philip > Sep 4, 2019 9:15 PM | Report Abuse X
https://klse.i3investor.com/servlets/pfs/123029.jsp
Your track record.
Calvin tan eng Yee angry I am posting and meeting track of his portfolio.
Calvin you are free to take a look at my portfolio at any time.
2019-09-05 09:45
Don't divert attention from your Pchem loss of Rm1.03
In all off Calvin stock picks where got losing more than Rm1.00 like Philip
Lafarge gone limit up
Naim went limit up
Opcom limit up
Go and check them all out
2019-09-05 15:05
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calvintaneng
Ecl a drag was the past
Don't drive cars looking at rear mirror
These are the positives in front of mbsb bank
And Epf plus mbsb bank directors are sanguine by reinvesting all dividends paid
1. Now a full fledged bank mbsb bank is able to reduce it's cost of capital
2. By lucky draws mbsb bank has drawn in extra fresh capital of Rm4 billions. Lucky draw prize only a mere 0.005. % or Rm2 millions
3. With Tier 1 constrained by being unable to meet loan demands for housing and others Mbsb Bank has a wide market of opportunities
4. Most Malaysians don't know how to invest in the stock market. As such they keep the bulk of their cash in banks. This is extremely good fodder for Mbsb bank to tap and expand
5. And so the new beginning of another promising bank in Malaysia will be mbsb bank
2019-09-04 10:06