The speculation over the past few days were right on the mark. MBSB's spectacular performance in 1Q was largely ignored by most funds and investors. When mentioned the name MBSB, its as if its just a building society. What many did not fathom was that they were about the last few to tap into government servants lending.
As an exempt finance company, MBSB is allowed to undertake the financing business in the absence of a banking licence. Under the leadership of CEO Datuk Ahmad Zaini Othman, the company has since 2009 undertaken major reform. From being a traditional mortgage lender, MBSB has moved to a more dynamic platform offering more products, including retail and corporate loans.
The company has carved a niche in the provision of personal financing to civil servants. It can make direct salary deductions, having obtained the code from Angkatan Koperasi Kebangsaan Malaysia (Angkasa) in 2005. The total loans portfolio in this niche segment has grown in prominence, surging from 1% of MBSB's entire loan base in FY05 to 27.5% in FY10, while its personal loan base has more than quadrupled, from RM92.2 million to RM4 billion, in just five years.
Currently, MBSB has extended RM90 million in personal loans to civil servants through Angkasa, compared with an estimated total market worth RM143 billion, a gap which indicates a potential market of RM53 billion. We see huge potential for MBSB in leveraging the growth in personal financing for civil servants.
Its high impaired loans ratio due to legacy accounts originated from bridging and revolving loans extended to property development projects during the 1997 Asian financial crisis has been trending lower in the past few years. On a brighter note, these loans are collateralised by properties with an estimated market value of RM8.2 billion, which is adequate to cover the RM4.9 billion in gross impaired loans in FY10. Furthermore, MBSB has fulfilled the minimum risk-weighted capital ratio (RWCR) of 7% and achieved the internal target of 7% for core capital ratio (CCR), the minimum required under Basel III. Thus, the company's improved asset quality and capital buffer will firmly anchor its future growth.
The just announced quarter saw net EPS surging to 10.5 sen, if assuming zero growth, that is 42 sen EPS, seriously undervalued even at RM2.00. The only query I would have is how they manage their bad loans as their clientele is not exactly prime or good subprime. The company seems to be patently aware of the situation and has been addressing that ratio closely.
PRESS RELEASE 2 AUGUST 2011
FIRST HALF 2011 FINANCIAL PERFORMANCE
For the six (6) months ended 30 June 2011, MBSB Group achieved a pre-tax profit of
RM197.0 million, an increase of 113% as compared to the pre-tax profit of RM92.7
million for the corresponding period in 2010. This contributed to improved basic
earnings per share of 19.70 sen and annualised return on equity of 43%.
On quarterly basis, the Group recorded a pre-tax profit of RM105.9 million for the 2nd
quarter as compared to the 1st quarter pre-tax profit of RM91.0 million. The higher pretax
profit is mainly due to higher income from Islamic banking operations and
conventional business net interest income, lower other operating expenses and lower
impairment allowances on loans. These were partially set off by lower other income in
the current quarter.
Dato’ Ahmad Zaini Othman, the Chief Executive Officer commented,“the strong earnings
posted for the first half of 2011 remain to be largely contributed by Personal Financing-i
product. However, new products namely Contract Financing and SME Cash Express
have made promising contributions to the Company’s asset growth due to the
encouraging response from corporate customers. MBSB aims to be a preferred financial
provider for both of these market segments”.
As at 30 June 2011, net loan, advances and financing stood at RM13.2 billion, an
increase of 23% as compared to RM10.7 billion as at 31 December 2010. The deposits
which stood at RM12.1 billion as at 30 June 2011 grew by 15% from 31 December 2010
of RM10.5 billion.
Dato’ Zaini further commented “the Company’s sales channels have increased with the
opening of one new full-fledged branch and four new Representative Offices this year.
Such branch expansion has helped to extend our reach to retail customers in providing
the Company's financial products and services. MBSB will continue to strive for
operational excellence with its Project Management and Monitoring Department having
achieved an ISO 9001:2008 certification. This will help to increase the confidence level
of its stakeholders. In the pipeline are the establishment of a Customer Call Centre and
development of new retail products, Hire Purchase and Credit Card”.
| | INDIVIDUAL PERIOD | CUMULATIVE PERIOD | |||
| | CURRENT YEAR QUARTER | PRECEDING YEAR CORRESPONDING QUARTER | CURRENT YEAR TO DATE | PRECEDING YEAR CORRESPONDING PERIOD | |
| | 30/06/2011 | 30/06/2010 | 30/06/2011 | 30/06/2010 | |
| | $$'000 | $$'000 | $$'000 | $$'000 | |
| 1 | Revenue | 318,563 | 176,129 | 630,198 | 345,251 |
| 2 | Profit/(loss) before tax | 105,933 | 49,489 | 196,959 | 92,666 |
| 3 | Profit/(loss) for the period | 78,247 | 49,507 | 146,527 | 92,701 |
| 4 | Profit/(loss) attributable to ordinary equity holders of the parent | 78,247 | 49,507 | 146,527 | 92,701 |
| 5 | Basic earnings/(loss) per share (Subunit) | 10.52 | 7.07 | 19.70 | 13.24 |
| 6 | Proposed/Declared dividend per share (Subunit) | 3.75 | 0.00 | 3.75 | 0.00 |
AS AT END OF CURRENT QUARTER | AS AT PRECEDING FINANCIAL YEAR END | ||||
| 7 | Net assets per share attributable to ordinary equity holders of the parent ($$) | 0.8185 | 0.6623 | ||
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