MORNING CALL:9/8/23

MBSB is almost a full-fledged bank but Kenanga feels it has some ways to go

Transcript

00:00 This midweek, we put the spotlight on Malaysia Building Society or MBSB, where Kenanga says

00:06 that this new full-fledged bank has set itself a very high bar.

00:10 However, it feels the stock is overbought, hence its underperformed call on MBSB, although

00:15 it did up its target price from 51 cent to 67 cent.

00:19 In case you missed it, the acquisition of MIDF had a share swap consideration of 1.01

00:24 billion ringgit to be satisfied via the issuance and allotment of approximately 1.05 billion

00:30 new MBSB shares to sole shareholder Pemodelan Nasional Bahad is a deal that Kenanga calls

00:36 reasonable.

00:37 With the merger, it turns MBSB into a full-fledged bank with complete end-to-end banking services.

00:44 Their respective portfolios actually reflect minimal overlaps in terms of product offerings

00:48 and hence could see more complementary benefits.

00:52 At the same time, it also presents an opportunity to consolidate and optimise backend operating

00:57 functions.

00:58 A successful execution of its growth strategies post-merger could lead to the enlarged bank

01:03 to come closer to delivering double-digit ROEs as aspired by the group.

01:08 However, Kenanga says due to the expected implementation period and shareholder dilution

01:14 from the exercise, current price points could indicate that the stock has been overbought.

01:19 Looking at Bloomberg data, Kenanga has its sell call while the other call is from Aminvest

01:23 and that is a hold on MBSB.

01:26 The average target price works out to 70 cent which is 5 cent below its last close of 75

01:31 cent.

01:32 [Music]