MBSB to gain from new delivery channels

PETALING JAYA: The creation of delivery channels that will help in acquiring new customers and drive down operational expenses are factors prompting MIDF Research to maintain a “buy” call on non-bank lender Malaysia Building Society Bhd (MBSB).

The research house remains optimistic on MBSB’s performance, supported by the current and future initiatives being planned and executed. It has a target price of RM1.50 per share and has pegged the financial year ending Dec 31, 2018 (FY18) book value per share to a price-tobook value of 1.1 times.

MBSB recently announced its full-year net profit that came in above MIDF Research and market’s consensus, accounting for 106.5% and 119.5% of full-year estimates, respectively.

“The strong earnings growth was due to a lower allowance for impairment losses on financing/loans and advances,” it said.

It added that allowance for impairments declined by 23% for FY17, with the fourth quarter’s fol- lowing the same pattern of previous quarters.

It noted that the lower cost of funds also pushed net interest income higher. However, the cost-to-income ratio in the fourth quarter marginally increased from the same quarter in the previous year.

“This was due to the necessary merger expenses and the expansion of business products and segments,” it said.

The research house said the cost-to-income ratio of 22.6% remained at healthy levels in comparison to the industry’s average of 49.7%, while the FY17 asset quality as measured by net impaired financing/loans improved 0.76 percentage points year-on-year to 2.87.

“Despite the results coming in above our expectations, we are maintaining our FY18 forecast as we have taken into account the reduction of impairment allowance as well as improving net income.”

MIDF Research said earnings forecast for FY19 would reflect MBSB’s full-year earnings projection as a full-fledged Islamic bank.