MBSB’s FY12 RM393.7m core profit was marginally above expectations, accounting for 110.0% and 106.5% of our and consensus’ forecasts respectively. Note that our core net profit estimate excludes one-off items amounting to some RM53m. The profit growth was buoyed by an 87% jump in Islamic banking income on the back of 50.8% loans growth, while ROE stood at 34.4%. Although the slight increase in 4Q gross NPLs resulted in a 30-40bps uptick in its NPLs ratio, asset quality remained healthy. MBSB still saw robust deposits growth as its LDR ratio improved, although this was still above the FY11 level. Maintain BUY, with our FV upgraded to RM3.15 as we roll over to 2.1x FY14 BV (3% growth rate, COE of 12% and ROE of 22.7%).
Gross loans, deposits growth exceed expectations. The gross loans growth of 50.8% y-o-y exceeded management's 2012 target of 20%-25%, but was in line with our forecast for 51%, driven by the strong personal loans segment, which contributed 66.3% of total gross loans. Meanwhile, its loan-to-deposit (LDR) ratio stood steady at 112.9% as deposits grew at a solid 59.1%, but this was still higher than the historical <110%.
4Q NPLs tick up marginally. Total gross impaired loans have been trending down, save for 4Q, during which it inched up 6% q-o-q to RM3bn. Consequently, the quarter’s gross non-performing loans (NPLs) ratio nudged up 30bps to 11.2%, while net NPLs climbed 40bps to 4.5%.
Proposes 27 sen dividend. MBSB has proposed a final dividend of 9 sen and a special dividend of 18 sen, bringing its total gross DPS to 33 sen for a 15% yield, based on the current share price.
Maintain BUY; moving over to our FY14 forecasts. We are revising upward our net profit forecast for FY13 by 9% to RM448.7m, as well as introduce our FY14 net profit forecasts of RM517.6m. accordingly, we roll over our FV to FY14 at RM3.15 per share, up 20% from previously, pegged to a 2.1x PBV. We are also assuming a 3% growth rate, COE of 12% and ROE of 22.7%. We will seek further guidance from the company at its briefing today.
Gross loans, deposits growth exceed expectations. The gross loans growth of 50.8% y-o-y exceeded management's 2012 target of 20%-25%, but was in line with our forecast for 51%, driven by the strong personal loans segment, which contributed 66.3% of total gross loans. Meanwhile, its loan-to-deposit (LDR) ratio stood steady at 112.9% as deposits grew at a solid 59.1%, but this was still higher than the historical <110%.
4Q NPLs tick up marginally. Total gross impaired loans have been trending down, save for 4Q, during which it inched up 6% q-o-q to RM3bn. Consequently, the quarter’s gross non-performing loans (NPLs) ratio nudged up 30bps to 11.2%, while net NPLs climbed 40bps to 4.5%.
Proposes 27 sen dividend. MBSB has proposed a final dividend of 9 sen and a special dividend of 18 sen, bringing its total gross DPS to 33 sen for a 15% yield, based on the current share price.
Maintain BUY; moving over to our FY14 forecasts. We are revising upward our net profit forecast for FY13 by 9% to RM448.7m, as well as introduce our FY14 net profit forecasts of RM517.6m. accordingly, we roll over our FV to FY14 at RM3.15 per share, up 20% from previously, pegged to a 2.1x PBV. We are also assuming a 3% growth rate, COE of 12% and ROE of 22.7%. We will seek further guidance from the company at its briefing today.
Excluding RM53m one-off items. We have excluded some one-off disposal gains totaling RM55.4m, which we believe included the disposal of an abandoned mall in Johor, a RM4.8m loss in the disposal of a subsidiary as well as a disposal gain of foreclosed properties amounting to RM2.2m. That said, MBSB’s core net profit jumped 22.2% y-o-y, or 37.2% higher, while total net profit including the one-off items would have come in at RM446.7m.
Gross loans growth exceeds management's target. The gross loans growth of 50.8% y-o-y exceeded management's target of 20%-25% for 2012, but was in line with our forecast for 51%, mainly attributed to strong response to its PF-i scheme by civil servants. Net loans surged 59.8% y-o-y and 4.8% q-o-q (vs 9MFY12’s 60.1% y-o-y and 5.6% q-o-q). While we believe management will likely maintain its loans growth guidance going forward, we are retaining our loans growth targets at 20% and 15% for FY13 and FY14 respectively.
No signs of loans portfolio rebalancing. MBSB has mentioned several times that it intends to maintain a balanced loans portfolio comprising equally proportions of the three main segments of residential loans, personal loans and corporate loans. In 3Q12, its aggressive efforts to boost personal loans growth resulted in the segment making up 65% of total loans. Although the personal loans segment has moderated with a q-o-q growth of 6.0%, its y-o-y growth pace of 104.1% still beat that in the other two loans segments. Currently, personal loans contributed 66.3% of total gross loans, while the shares of corporate loans and mortgages have shrunk to 13.1% and 20.1% respectively. We believe that MBSB's efforts to carve a niche expertise in corporate financing, particularly in the education and oil & gas sectors, have yet to pay off.
Gross loans growth exceeds management's target. The gross loans growth of 50.8% y-o-y exceeded management's target of 20%-25% for 2012, but was in line with our forecast for 51%, mainly attributed to strong response to its PF-i scheme by civil servants. Net loans surged 59.8% y-o-y and 4.8% q-o-q (vs 9MFY12’s 60.1% y-o-y and 5.6% q-o-q). While we believe management will likely maintain its loans growth guidance going forward, we are retaining our loans growth targets at 20% and 15% for FY13 and FY14 respectively.
No signs of loans portfolio rebalancing. MBSB has mentioned several times that it intends to maintain a balanced loans portfolio comprising equally proportions of the three main segments of residential loans, personal loans and corporate loans. In 3Q12, its aggressive efforts to boost personal loans growth resulted in the segment making up 65% of total loans. Although the personal loans segment has moderated with a q-o-q growth of 6.0%, its y-o-y growth pace of 104.1% still beat that in the other two loans segments. Currently, personal loans contributed 66.3% of total gross loans, while the shares of corporate loans and mortgages have shrunk to 13.1% and 20.1% respectively. We believe that MBSB's efforts to carve a niche expertise in corporate financing, particularly in the education and oil & gas sectors, have yet to pay off.
Hire purchase segment makes impressive debut. The auto financing segment's impressive 63.1% q-o-q growth to RM128m in FY12 boosted its share of MBSB's loan portfolio. Although the quantum is still small, this segment now contributes 0.5% of the group's total loans.
NPLs up marginally. Total gross impaired loans have been dipping, save for 4Q, during which loans inched up 6% to RM3bn. This led to the group’s gross non-performing loans (NPLs) ratio ticking up 30bps to 11.2%, while its net NPLs ratio climbed 40bps to 4.5%. Nevertheless, MBSB’s asset quality indicators still improved significantly versus FY11.
CIR inches up but still near average. We had projected a 25% surge in MBSB’s FY12 cost-to-income ratio (CIR) after it rolled out its integrated Core Banking System (MICoB), estimated to cost RM100m over five years. Fortunately, the CIR still fell within the average range. As the system aims to enhance the group's IT efficiencies, services and productivity, we expect thiscatalyst to help maintain or improve the CIR at current levels over the longer term.
Deposit campaigns pay off. We believe the group has been benefiting from its slew of retail deposit campaigns, as indicated by its improved LDR and loans-to-funding (securitisation) ratios to 112.9% and 100.2% respectively. Its y-o-y deposits growth of 59.1% exceeded the gross loans growth of 50.8%, but was lower than the net loans growth of 59.8%. That said, the LDRs were still higher than those in FY11, boosted by the good response to its PF-i schemes in 1HFY12.
Maintain BUY. Rolling over to FY14 forecasts. We are revising higher our FY13 net profit forecasts by 9% to RM448.7m, and introducing our FY14 net profit forecast of RM517.6m. That said, we roll over to FY14 and arrive at an FV of RM3.15, which is 20% higher from previously. This is pegged to a 2.1x PBV, assuming a 3% growth rate, COE of 12% and ROE of 22.7%.
Rerating catalysts. The company has scheduled an analyst briefing today. We will be seeking further guidance on what we deem as key re-rating catalysts, including: i) credit costs and provision movements, ii) dividend payout, iii) NIMs target, and iv) capital adequacy ratios, among others.
Rerating catalysts. The company has scheduled an analyst briefing today. We will be seeking further guidance on what we deem as key re-rating catalysts, including: i) credit costs and provision movements, ii) dividend payout, iii) NIMs target, and iv) capital adequacy ratios, among others.
Source: OSK
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