EPF not reducing stake, says MBSB

KUALA LUMPUR:  There has been no indication from the Employees Provident Fund (EPF) that it will pare down its stake in Malaysia Building Society Bhd (MBSB), said its CEO Datuk Ahmad Zaini Othman.

“They are supporting our rights issue and any decision to divest anything will be at the shareholders’ level,” he told reporters after MBSB’s AGM and EGM here yesterday.

The EPF presently holds a 66.3% equity interest in MBSB, while Permodalan Nasional Bhd (PNB) has a 14.9% stake. In February, MBSB had proposed a rights issue to raise about RM500 million, with the EPF expected to fork out about RM331.6 million for its portion of the issue.

There had been calls for the EPF and Khazanah Nasional Bhd to pare down their holdings in government-linked companies to help improve liquidity and attract more participation in the market.

Tang Yow Sai, MBSB’s chief financial officer, said the rights issue would raise its core capital ratio by 50%, although he declined to provide exact figures.

“We can do away with the rights issue, but we need a certain level of capital so our key ratios are maintained within acceptable standards. This is why we went back to our shareholders,” said Zaini.

He added that in the past capital injections had been used to take care of legacy loans, which in recent years saw some form of resolution through attempts to revive them via “commercial means”.

MBSB’s non-performing loans stood at 16% last year, and it aims to reduce this to about 14% this year.

Zaini also said that MBSB aspired to conform to the same transparency levels that applied to banks.  “We are trying to close regulatory gaps in complying with the Banking and Financial Institutions Act 1989,” he said, adding that he did not dismiss the possibility of MBSB becoming a bank.

Zaini said, going forward, MBSB aims to grow its personal financing business to about 50%, from 30% of its portfolio at present, while reducing exposure to mortgages from the current 50%, to up to 35% of its portfolio, with corporate loans taking up the rest.

“Our target is very aggressive, and we are on track for this year. This year we will be able to double our personal finance disbursements to about RM6 billion.

With regard to new products and services that MBSB is planning to roll out this year, Zaini said it was looking to introduce a hire-purchase programme by June or July, in addition to an Islamic credit card programme for civil servants by mid-year.

“This [credit card] programme will see the operational set-up run by another entity as MBSB’s partner, while MBSB will be responsible for the business and marketing side.

We are engaging with the likes of MBf [Holdings Bhd], we are not dealing with a bank,” he said, adding that the company was also looking at bancassurance business through its 33-branch network.

“Our intention for this financial year is to push for product diversification to provide a whole spectrum of banking services to our customers,” he said.

Zaini also said MBSB is still looking to dispose of or put in place a scheme to develop its various properties and land bank that are not in use.

For FY10 ended Dec 31, MBSB posted a net profit of RM146 million on revenue of RM769.9 million, an increase of 155% and 43.1%, respectively. Nonetheless, group shareholders’ equity dropped to RM381.1 million from RM552.6 million the previous year, due to a change in accounting policy with the adoption of FRS139.

According to an announcement to Bursa Malaysia recently, MBSB’s target headline key performance indicators for this year are 15% growth in group net return on equity and 25% group revenue growth.

The counter’s trading volume picked up last week following the initiation of coverage by two research houses. AmResearch has a “buy” recommendation on the stock with a fair value of  RM3 (RM2.20 ex-rights), and Kenanga Research also a “buy” call on the stock with a target price of RM3.30.

MBSB also hit its 52-week high of RM2.38 on the day AmResearch initiated coverage.

Its 52-week low was RM1 on May 7, 2010. Year-to-date, the counter has gained about 53%.

It ended trading yesterday at RM2.26, with 5.16 million shares done.