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Tuesday, October 1, 2013

MBSB may be impacted by delays in new product launches


PETALING JAYA: Malaysia Building Society Bhd (MBSB) is seen to be lagging behind its peers, as it may be impacted by delays in introducing new products for its customers.

The rolling out of these products has been deemed a necessity to mitigate the regulatory changes to the personal financing (PF) segment announced by Bank Negara in July, said RHB Research Institute. The central bank had in July placed a 10-year cap on the tenure for personal loans.

It noted that MBSB’s management had hinted on such products in the second quarter of this year as part of its strategy to mitigate the adverse impact. The strategies include more bancatakaful and wealth management products, floating rate financing, extending PF to the private sector and increasing corporate financing.

A check on the non-bank financial provider’s portal, however, showed that it was still displaying several ongoing PF promotions that had been launched earlier in the year prior to the regulatory guidelines, including the PremiumPlus and the MAX-i 2 packages.

Consequently, RHB Research has downgraded the stock to a “neutral” from a “buy”, with a fair value price of RM3.10 from RM3.70 on a higher risk-free rate of 4.0% and two times financial year 2014 (FY14) forecast price-to-book value.

“Thus, we have cut FY13 forecast and FY14 forecast earnings by 8.9% and 6.2%, respectively, as it appears to be lagging behind its peers. This is premised on slower financing growth of 22.4% and 16.1% (from 29.2% and 15.8%), higher interest expenses and personnel costs,” the report said.

“MBSB is the only key PF player that has yet to roll out a firm long-term PF product, although it is likely that we would see one by October,” it added.

It noted that its peers involved in this segment, such as Bank Rakyat, had already introduced new or revised PF packages that cater to civil servants and the private sector.

Further, its Hari Raya PF package with financing of RM50,000 and a three-day disbursement period might not be as attractive as similar festive packages rolled out by the company in the past, rendering it insufficient to maintain its strong financing track record.

“While most non-bank financial institution players face restrictions from the tightened approval criteria in the debt service ratio, MBSB may be affected more than others due to its exposure to highly-leveraged low-income civil servants,” it said.

“Our reasoning is supported by the fact that the package’s minimum monthly salary requirements (post-stripping out allowances) may be as low as RM700,” it added.

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