MBSB: At the Tipping Point

Result Update

For QE31/12/2014, MBSB's PBT dropped 67% q-o-q or 65% y-o-y to RM87 million while its revenue dropped by 12% q-o-q or 18%  y-o-y to RM594 million. The q-o-q decrease in PBT was mainly due to lower operating income and higher impairment losses on loans, advances. These were partly set off by higher other operating income.

On the other hand, MBSB's net profit rose 104% q-o-q or 90% y-o-y to RM393 million mainly due to recognition of deferred tax of RM366 million in relation to origination & reversal of temporary differences.


Table: MBSB's last 8 quarterly results


Chart 1: MBSB's last 42 quarterly results

Valuation

MBSB (at RM2.22 yesterday) is now trading at a current PE of 5.6 times (based on the annualized EPS of 39 sen). However, the last 4 quarters' EPS was boosted by a one-off deferred tax recognition of RM366 million. If this one-off item is excluded, the 4 quarters' EPS would be lowered to 25 sen and PE would increase to 8.9 times. Going forward, there is a concern that the company's earning will slide further due to competitive pressure as reflected in the drop in revenue.

Technical Outlook

MBSB could have made a double top reversal at RM2.60. If it slid further (say below RM2.00), the stock could be entering into a downtrend.

 
Chart 2: MBSB's monthly chart as at Feb 17, 2015_12.30pm (Source: ShareInvestor.com)

Conclusion

Based on poorer financial performance & mildly negative technical outlook, I believe it is advisable to reduce our position in MBSB.

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.