Thursday, 7 March 2013

Malaysia Building Society - Privatisation rumour lifts share price Hold

- We maintain HOLD on Malaysia Building Society Bhd (MBSB), with an unchanged fully-diluted fair value of RM2.60/share. Our fair value is for ex-warrants and is based on an unchanged estimated adjusted (for warrants) FY13F ROE of 19.8% FY13F, leading to a fair P/BV of 2.0x.

- MBSB’s share price has moved upwards by c.RM0.28 or 12% in the past two days, to RM2.68 from RM2.40. We understand there are no pending corporate announcements from the company.

- We believe the share price movement is due to ongoing rumours of possible privatisation of MBSB.

- Besides this, MBSB was reported to be planning to increase its loan disbursement to around RM14bil in FY13F, or a 15% to 20% increase from last year’s RM12bil.

- The company had done exceptionally well in loans growth in FY12, with a 51% YoY increase in total loans to RM26.9bil from RM17.8bil in FY11.

- We forecast loans growth at 15% in FY13F, to RM30.9bil. At the company’s earlier analysts’ briefing, the company had alluded to a loans growth target of 20% to 25% for FY13F, indicating some upside to our forecast.

- Meanwhile, the share price was also boosted earlier by the unexpected announcement of a generous dividend during the release of its 4Q12 results at the end of January 2013. Recall the company has declared a generous 18 sen GDPS (net RM0.135 sen), on top of the final dividend of 9 sen (net RM0.0675 ), partly to utilise its Section 108 tax credit.

- Given the generous dividend, we expect more warrant (conversion price: RM1) holders to convert the warrants into shares. The total number of shares has increased to 1,260.4mil currently, from 1,240.4mil as at end-December 2012.

- We estimate there are still about 455mil warrants outstanding, vs. the earlier total of 506mil. To recap, we have already assumed full conversion of warrants in our forecasts, with the total issued shares estimated to increase to 1,721.5mil from 1,260.4mil.

- Meanwhile, we believe the company is still contemplating a possible rights issue. The company has hinted it plans to raise no less than RM3bil to RM4bil in the longer term to fund its growth. Tier 1 ratio is estimated at 5% as at end-FY12, post dividend.

Source: AmeSecurities

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