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It is Worth for Long Term Investment in MBSB

Know about MBSB

MBSB (1171, Mainboard Finance Sector) is a non-bank financial companies. The main business of the company is to charge deposits and lending. Over the past two years, the company has been changing their business strategy by dabbling in personal loans for civil servants. The amortization period for these type of personal loans is generally between 15 to 20 years, with a fixed interest rate of 5-5.25%, the actual interest rate will be about 8-9% . These types of loans also attached with the Islamic insurance and will writing services that offered by MBSB. By offer such services, they will help to improve the company’s fee-based businesses that will enjoy the growth together with the loans.

In addition, the company also received contracts for offering financing loans for government projects, oil & gas companies, and also SMEs. All these are relatively short-term financing.

From the deposits aspect, the major deposits of MBSB are from government agencies and government linked companies, like the company deposits of Tenaga and Petronas. The deposits that contribute by the public is just minority which only 10% of the total deposits the company received.

The company is currently having 33 branches across the country. Besides, the company also selling it products and offering loans through their appointed agents as well.

Currently, the KWSP(EPF) and Khazanah are holding a total 79.4% of MBSB stake. From the prediction of market experts, MBSB is one of the government linked companies that the Malaysia government intend to reduce their holdings. This led the company become a merging target for other financial institutions. MBSB seems to benefit from such prediction as it helps to support the company stock price.

MBSB has Bright Growth Potential for the Civil Servants Loans

Leaving aside all these predictions which have not yet materialized, MBSB is actually having a very good fundamental. The growth potential of the loan business for the company is very good. The major competitors of MBSB are the Bank Rakyat and BSN.

In October, the financial result that announced by the company at the discretion of the first 3 quarter ended in September showing that the net income is grow by 135% to reach RM95.08 million compare to last year RM40.51 million. Revenue is growing 73% from RM215.77 million to RM372.68 million.

The significant growth in net profit was mainly due to the brisk growth of personal loans to civil servants which pushing up the revenue of Islamic banking.

Third quarter non-interest income grew 71.8% year to RM130.4 million. Annual growth of total loans business increase by 30%. Among the growth, personal loans is increase by 130%, housing loans & mortgages down by 2.8% and corporate loans were down by 15%. The proportion of personal loans to total loans is increase from 39.9% in the previous quarter to 44.5%. While housing loans & mortgages are 32.1% and corporate loans are accounted for 23.4%.

In addition, the company has continued to pay dividends in the past three fiscal years with the weekly interest rate of more than 2%. The company’s current PE ratio is at a relatively low which is 7.19.

Overall, MBSB may well be a company that is having a good fundamental and it can be worth for the long-term investment.