MBSB held an analyst briefing yesterday chaired by its CEO,
Dato Ahmad Zaini Othman. We came back with the view that the group is likely to
see a good earnings growth in 2H12, led by a substantial loan disbursement of
RM7.2b and a healthy recovery in its non-interest incomes with marginal NIM
compression. Its earning visibility is now clearer as compared to 1H12.
Postbriefing, we reiterate our OUTPERFORM rating on MBSB with an unchanged
target price RM2.70.
Key highlights.
The group adopted the tactical strategy of a zerotransfer promotion campaign in
1H12 in its efforts to grow its loans. In total, RM4.7b of PF-I loans were
disbursed in the 2Q (vs. RM2.5b in 1Q) with an aggregate total loan
disbursement of RM7.2b in 1H12.
This also means that the group has nearly achieved its
RM8.0b full-year loan disbursement target within the first six months of the
year. In addition, it still has RM350m undisbursed loan from the corporate segment,
which will further support its loan
growth target in the
upcoming quarter.
Fee-based income however, fell in 2Q12 due to the promotion
transfer packages, which helped in subsidising the insurance fee, stamp duty and
migration cost from customers. However, as the promotion programme ended by
June 2012 and subsidising no longer required, we would likely to see a healthy
recovery in fee-based income in 2H12.
The group’s main strategy for the remainder of the year is
to build its assets by continuing profitable programmes such as its
hire-purchase loans, with the targeted potential clients being from the Klang Valley area.
Thus far, hire-purchase loans only account for less than 1% of its total
RM20.2b gross loans as compared to the banking industry’s average of
14.1%.
The net NPL ratio meanwhile has improved from 7.3% in 1Q12
to 5.8% in 2Q12. MBSB is looking to further shave its net NPL ratio to 5% this year
by refinancing two legacy loans as well as selling of some non-core assets.
The group has a low 6.6% Core-Capital Ratio and Tier-1
Capital Ratio of 10.5% as at end-June. As such, we believe a new capital
management plan is needed to continue to support the group’s high balance sheet
growth for 2013. The plan should include securitisation of loans, issuance of
debts and also possible capital raising
exercises. We think the exact route under such a plan will be unveiled by the
management by the end of this year.
OUTPERFORM
maintained. We are maintaining our
target price of RM2.70 based on a targeted P/BV of 1.6x over FY13 BV of RM1.70.
Our target price of RM2.70 implies 7.1x and 6.0x PER on FY12 EPS and FY13 EPS
respectively. At the current level, the stock offers a potential capital upside
of 21%. Together with an additional dividend yield of 2.5%, this will bring the
potential total return to 23% over the next 12 months. The group’s ROE of 28.1%
remains one of the highest among financial stocks.
Source: Kenanga
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