MBSB retreats on weaker 1Q earnings, analyst downgrade

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KUALA LUMPUR (May 8): Shares of Malaysia Building Society Bhd (MBSB) declined this morning after AffinHwang Capital Research downgraded the stock “Sell” (from Buy) at RM2.01 with a lower target price of RM1.80 (from RM2.80) and said that subsequent to a weak 1Q15 (net profit down 36.8% year-on-year), MBSB’s management had guided that the earnings outlook will be more challenging ahead, driven by a 2-year impairment programme which will see credit costs spike up to 130–150 basis points.

At 10.40am, MBSB (fundamental: 1.20; valuation: 3.00) fell 0.50% or one sen to RM2 with 1.52 million shares traded. It had earlier slipped to a low of RM1.98.

In a note today, AffinHwang Capital said its downgrade was premised on: i) management’s lack of transparency; ii) concern over more retail loans turning NPL-status, hence more provisions; and iii) more consensus earnings and rating downgrade.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)