KUCHING: Malaysia Building Society Bhd (MBSB) will likely be an acquisition target if it enters another merger and acquisition (M&A) scenario, analysts viewed.
Kenanga Investment Bank Bhd’s research arm (Kenanga Research) explained that this is due to MBSB’s smaller market capitalisation of RM6 billion.
“Its share price could re-rate up to the offer price if the deal is made attractive enough to succeed,” it added.
Meanwhile, on MBSB’s plan to become an Islamic Bank, Kenanga Research said if the plan succeeds, the transformation would allow the group to tap into cheaper sources of funding, presently not available to it (such as current accounts) due to its position as an exempt finance company.
In addition, the research team noted if MBSB turns into an Islamic bank, it could increase its product offerings, such as treasury products which could become a future source of non-interest income.
“The takeaway from our previous meeting with management was that the group is still open to corporate exercises that will help it to achieve or accelerate its aspirations and transformation plans.
“Hence, it is possible that we may see the group in another M&A scenario in the next five years,” it believed.
At present, there are 16 licensed Islamic banks in Malaysia, which could be future competitors if MBSB were to become an Islamic bank, Kenanga Research said.
“On the flipside, they could also be potential partners (including foreign players whose shareholdings are restricted to 49 per cent-ownership) to help MBSB achieve its aspiration.
“Rumour has it that Bank Islam (which is aiming to grow its local footprint) could be a potential partner. However, MBSB has since denied that it has begun discussions with any party,” it noted.
Aside from that, the group’s aspiration to become an Islamic bank runs along-side its 2015-2020 ‘second marathon’ aspirations of, amongst others, elevating its fee income contribution and expanding its corporate loans in selected industries such as plantation, property and industrial equipment to make up 30 per cent of its portfolio.
Kenanga Research maintained a ‘market perform’ on the stock and pegged its target price to RM2.40 per share, based on a FY15 blended pricebook per price-earnings ratio of 1.4 per seven-folds.