Affin IB Research downgrades MBSB to Reduce, cuts target price to RM2.80

Affin IB Research downgrades MBSB to Reduce, cuts target price to RM2.80
Business & Markets 2013
Written by theedgemalaysia.com
Thursday, 18 July 2013 09:49

KUALA LUMPUR (July 18): Affin IB Research had downgraded Malaysian Building Society Bhd (MBSB) to Reduce (from Buy) at RM3.06 with a lower target price of RM2.80 (from RM3.63) and said MBSB's near term earnings outlook appear compromising as Bank Negara Malaysia's (BNM) recent measures, especially the curb on the tenure of personal loan financing, is expected to thwart MBSB's loan growth prospects.

In a note Thursday, the research house said it had lowered its forecasts on MBSB's FY13-15 loans growth to 18.5%, 17% and 17.4% respectively from 23.6-24%, and in tandem with that, its earnings forecast had been downgraded by 6.0-9.6%.

It said one of the primary reasons for MBSB's robust growth over the past few years back was due to management's shift in business strategy focus on the civil servants personal financing market (under the high margin Islamic PF-i).

“Given MBSB's high reliance on the PF-i segment, of which has provided strong margins, the group's operating income is expected to be affected despite some other counter measures to mitigate the potential loss in revenue.

“We downgrade MBSB from Buy to Reduce, and cut our price target to RM2.80 (on a fully-diluted basis) from RM3.63. Our revised price target is based on a lower P/BV multiple of 1.81x (from 2.25x) on our revised FY14 ROE forecast of 23.4% vs. 26.3% previously valuation, with a higher cost of equity of 15.5% while growth rate of 5.0% remained unchanged," it said.