not vested
MALAYSIA BUILDING SOCIETY BHD By Gurmeet Kaur
Current stock price: RM1.86
MALAYSIA Building Society Bhd (MBSB) traded at RM1.77 – its lowest level this year. The stock is up by 4.5% to close at RM1.86 yesterday.
But at this price, the stock is still down by about a quarter year-to-date. It is also the cheapest finance stock with a price to book (P/BV) of 1.02 times.
Eight months ago, the company was valued at a P/BV of 1.91 times or RM2.82 under a proposed three-way merger.
But this alone is not good enough a reason to consider the stock for one’s portfolio. Business-wise, MBSB is being transformed into a different entity that will reduce its reliance on personal financing loans that it is historically associated with.
Early this year, the company kicked off a five year business plan (to run from 2015 to 2019) where it hopes to achieve a corporate financing ratio of 30% from 15% now. Retail financing, meanwhile, will be brought down to 70% from 85% . This strategy will cushion the expected slowdown in personal financing, which has been hit by a slew of tightening measures.
It has revived plans to convert into a full-fledged Islamic bank after the proposed merger with CIMB Group Holdings Bhd and RHB Capital Bhd was aborted early this year.
For this, it has made known that the preferred way is a merger with an existing Islamic financial institution.
According to reports quoting its chief executive officer Datuk Ahmad Zaini Othman, a corporate exercise could take place as early as this year or next. MBSB, in which the Employees Provident Fund (EPF) has a 64% stake, is understood to be keen on Bank Islam Malaysia Bhd as a merger partner.
To prepare itself for a potential merger and acquisition, the company is planning a capital-raising exercise of about RM3bil, to be announced sometime in the middle of this year. It is adopting a stricter coverage standard for loan impairments as it prepares to become an Islamic bank.
It is working towards a 100% financing loss coverage, from 80% now, matching the level most banks have in the country.
The downside is that earnings will remain weak for the short-term.
Source: The Star