Thursday, August 01, 2013

MBSB- Stepping Out of the Shadow?


Result Update

For QE30/6/2013, MBSB reported a net profit of RM165 million- unchanged from the immediate preceding quarter (of RM166 million) but a big jump from the same quarter last year (of RM94 million). The company attributed the q-o-q improvement in bottom-line to the profit contribution from Islamic operations, lower amortisation cost associated to the personal financing disbursement and was partially set off by higher operating expenses and impairment allowance.


Table: MBSB's last 8 quarterly results


Chart 1: MBSB's last 36 quarterly results


Concern about 'Shadow Banking'?


Bank Negara has recently acted to oversee the 'shadow banking' industry with the newly enforced Financial Services Act (FSA). By 'shadow banking', BNM was referring to "non-banking financial institutions (NBFIs) (which) gave out RM43bil in new personal financing facilities, up from 63.7% previously according to Bank Negara’s Financial Stability and Systems Report 2012. This is more than two times the loans disbursed by banks for personal loans at RM19.4bil for 2012. The central bank notes that such loans extended by the three largest NBFIs grew at a faster rate of 23.1% in 2012 versus 17.1% a year ago. That growth is faster than the 10.4% recorded by the entire banking sector. For more, go here.

While this action is viewed positively, it will have a negative impact on MBSB's operation & earning in the near term. For more, go here.




Valuation

MBSB (at RM3.10 yesterday) is now trading at a PE of 8.4 times (based on last 4 quarters' EPS of 36.74 sen). At this PE, MBSN is still deemed very attractive.

Technical Outlook

MBSB is in a steady uptrend since breaking above the strong horizontal line at RM0.85 in March 2011. Its immediate resistance is at the horizontal line at RM3.20 while its immediate support is at the psychological RM3.00 mark.


Chart 3: MBSB's monthly chart as at July 31, 2013 Source: quickcharts)

Conclusion

Based on improving financial performance & relatively attractive valuation, MBSB is still a good stock for long-term investment. However, regulatory changes are coming to the NBFIs and this will certainly restrict the ability of MBSB to report continued growth in its earning. We must keep a close watch on this development and take action if the need arises. For now, the rating for MBSB should be lower from BUY to HOLD.

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, MBSB.

5 comments:

Chun Mun said...

Hi Alex,
I read your previous post about TMCLIFE. So what do you think about STEMLFE? Thank you and appreciate your sharing.

hng said...

Hi Alex

Many investor have perceived YTLP is debt burden now after it incur huge capex to develop Wimax. I've extract its financial result 3 year ago and compared it with latest result. Well, no doubt YTLP total debt is increase from 20,553m to 23,468m, or 14% (+ RM 2,915m); but bear in mind, YTLP net cash increase also 6,638m to 10,184m, or 53.4% (+ 3,546m); resulting in actual net increase in cash of RM631m despite being developing Wimax from scratch.

Lets compared current and 3 year ago YTL balance sheet to reexamine its financial strength after it start venture into Wimax.

2010 (2013)

Non current assets: 23,407 (25,606)
Current asset: 9,473 (13,769)
Cash: 6,638 (10,925)
Total asset : 32,880 (39,375)
Total equity: 6,956 (10,184)

Non current liab: 21,181 (23,940)
Current liab: 4,742 (5,249
LT Borrowing+ bond: 18,233 (20,908)
Current borrowing: 2,32 (2,56)
Total Liab: 25,923 (29,190)

Net Asset per share: 1.00 (1.36)

Financial ratio:

1. Net Gearing : 2.95 (2.30)
2. Current ratio: 1.998 (2.62)
3. Cash ratio: 1.40 (2.08)
4. Debt ratio: 0.788 (0.741)
5. Debt/equity ratio: 3.726 (2.866)

Valuation

1. Share price/book: 2.27 (1.205)
2. PE: 12.1x (10.9x)
3. DY: 13.13sen (nil)
4. Yield : 5.8% (nil)

(Remark: YTLP share price on 2 Aug 2010 was RM 2.27; annualized EPS 18.66sen vs. current share price RM 1.64; annualized EPS=15sen)

kakaka said...

MBSB biggest slice of their Net Profit come from Personal Financing.
With new BNM ruling, they are heavily impacted. Let see their result in next 2 quarter to see the actual impact.

Alex Lu said...

Hi Chun Mun

STEMLFE is in a different business from TMCLife. The latter used to be a competitor to STEMLFE but it has exited from the business of storing stem cells, etc.

Alex Lu said...

Hi kakaka

Yes, MBSB's reliance on the lucrative business of lending to civil servants is well-known. Once the lending guidelines are tightened up, it is not only the business volume may drop, the loan loss provision may also rise. This will be a double whammy for MBSB.