If MBSB is part of the deal for the mega merger, then there would be fewer redundancies.
KUALA LUMPUR: MIDF Research has downgraded Malaysia Building Society Bhd
(MBSB) to “neutral” from “buy” previously with an unchanged target price of RM1.08 as it believed the stock is fairly valued at current level.
MBSB’s shares have surged 20% since the start of the year to high of the day of RM1.09 yesterday.
“We are not surprised that the stock has rallied to the current level as we opine negative side on the company’s past quarterly results had been flushed out of the market and eventually, its share price has reacted positively to its FY17 earnings prospect, reflecting our view on the company,” MIDF said, adding that the stock was expected to consolidate at this level after a strong recent price action.
The research house also believed that the price rally of late is related to positive expectations of negotiations on a proposed merger with Asian Finance Bank Berhad (AFB).
Recall that Bank Negara requires that the negotiations be completed within six months from the date of central bank’s letter on Dec 21, 2016.
“Having said that, we do not see any significant impact from the proposed merger to the company’s FY17 earnings prospect despite if MBSB were able to complete the proposed merger with AFB this year.
“We are of the view that it would take time for the management to make use of the full fledge banking license. Therefore, we view all positives should have already been priced in the current rally,” MIDF said.
“We make no changes to our earnings forecast at this juncture. Our existing forecasts are based on its current non-banking operations, which will see its FY17 earnings growth of 40% from a low base and improvement in its asset quality,” it added.
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