MBSB suffered a q-o-q decline in its top-line & bottom-line (UPDATED)

Background

MBSB is involved in the provision of personal financing, mortgage loans & financing & corporate loans & financing. The main reason for MBSB's strong financial performance is that it has expanded aggressively into the personal loan sector, with growth coming mainly from lending to government servants.

Recent Financial Results

In QE31/12/2011, MBSB's net profit dropped 12% q-o-q to RM84 million while revenue declined by 7% to RM347 million. Compared to the corresponding quarter last year, net profit soared 554% while revenue rose by 66%.

MBSB attributed the decline in its net profit on q-o-q basis to drop in other operating income, drop in net interest income & higher impairment allowances on loans. There was no information in the drop in Revenue. The decline in its top-line & bottom-line could raise some concern about MBSB's rapid growth. However, it must be noted that there were similar decline- in QE31/12/2010 & QE31/12/2009- which did not change the strong growth record of this company.


Table: MBSB's last 8 quarterly results
Note: (1) This is a new table. The earlier table contained a small error.
(2) The EPS was extracted the results announcement in the Bursa website.


Chart 1: MBSB's last 30 quarterly results

Valuation (UPDATED)

Earlier we arrived at a PE of 5.6 times for MBSB by dividing the closing price of RM2.23 by the last 4 quarters' EPS of 39.5 sen. However, two readers i.e. Malaysia Stock Talk & maverick have pointed that the EPS is not corrected. What is the correct EPS for the last 4 quarters? By dividing the total earning of RM325 million by outstanding shares of 1216 million, we would have a gross EPS of 26.76 sen. If we divide the total earning of RM325 million by outstanding shares & warrant of 1722 million, we would have a diluted EPS of 18.90 sen.

Using these numbers, we can arrive at the basic PE & net PE of 8.3 times & 11.8 times, respectively. Based on these revised PE multiples, MBSB is still considered reasonable but no longer cheap.

Technical Outlook

MBSB has risen steadily from less than RM0.50 in 2009 to above RM2.00 today. Its next resistance is at RM2.50 and then at RM3.00.


Chart 2: MBSB's monthly chart as at Feb 2, 2012 (Source: Tradesignum)

Conclusion (SLIGHTLY REVISED)

Based on satisfactory financial performance & reasonable (no longer cheap) valuation, MBSB is a good stock for long-term investment. However, we must monitor this stock closely as it has suffered a drop in its top-line & bottom-line in the latest quarterly results. If it is a one-off decline, we can hold on to this stock. If not, we may have to reassess our position.