- We are maintaining our BUY rating on MBSB, with a revised fair value of RM3.20/share (from RM3.40/share previously) on a cum basis or RM2.86/share (from RM2.99/share previously) on an ex-rights price basis.

- Our earnings forecasts and fair value already reflect the latest information on the proposed rights issue (indicative rights issue of 2-rights-for-5-shares basis at an illustrative rights price of RM2.04), and is fully diluted for the previous warrants issued in FY11. Our fair value is based on a fully-diluted ROE (for previous warrants and potential imminent rights issue) of 18.5% (from 19.0% previously) for FY14, leading to fair P/BV of 1.80x (from 1.86x).

- At the company’s analysts briefing, the company indicated a renewed focus on the corporate loans segment, which is one of its key loans growth target ahead. Out of the RM3.8bil corporate loan base currently (11.8% of total loans), most are backed by collaterals.

- Generally, the personal loans’ industry volume is slower following new household measures introduced in mid-2013. With this, we have now reduced our total loan growth forecast for MBSB to 6.8% (from 13.0% previously) for FY14F. This leads to downgrade in our net earnings by 5.8% for FY14F.

- MBSB has now launched a new personal loan centre called PF-i Express Tunai at its new Putrajaya Service Centre. The main feature of this new service is its fast turnaround time. We understand that the new express service has been very successful, with new customer response for this new centre coming in way above expectations just by word of mouth alone.

- The briefing is positive as it indicates that MBSB is continuing to strive in the new loan growth areas, with primary focus now on corporate loans, given the latest impact to the personal loan industry. In addition, there are also continuous efforts to improve operational process, as evidenced by the latest successful launch of its PF-i Express Tunai service. This provides further proof of MBSB’s ability to compete in a generally slower market.

- Further, the adjustment to collective assessment rate is likely to be one-off and includes its corporate loans segment as well. Thus, we expect the collective assessment rate and loan loss provision to be stable from here on.

- We continue to expect earnings to be resilient and intact for FY13F. The latest industry volume indicates that volume growth may be crimped, but otherwise net earnings for MBSB should be sustained in FY13F.

Source: AmeSecurities