MBSB, Sarawak-based Companies

It is going to get tougher for MBSB, a significant player in the personal financing space, to deliver the kind of strong earnings and loan growth it has enjoyed in the past few years prior to 2014.

In 2013, BNM introducing stricter lending rules on PF that took effect in July 2013. The group which has a 64.7% stake owned by the EPF is however expected to feel the full brunt of those lending curbs in 2014.

PF accounted for 73% of its total loans in 2013 followed by mortgages 16.9%, corporate loans of 9.2% and auto loans of 0.6%.

Despite still making up 73% of its laon composition, its PF segment grew just 0.08% q-oq in the final quarter as opposed to its historical high of double digit growth. Industry observers expect this downtrend to persist ... as it is believed the new lending guidelines will continue putting a strain on this core earnings driver for MBSB.

Its gross non performing loan ratio improved to 5.4% in 4QFY2013 signaling the lender wants to transform into a full fledged bank.

Currently (Feb 2014) loan growth is a concern instead of NPLs. To grow its corporate loan segment is tough for it to compete with commercial banks.

Its CEO said MBSB is ready to become a full fledged ban and it is up to shareholders now if they want to go to the next stage.

It has also long been speculated that the EPF may privatize MBSB and merge it with the RHB Banking group in which it is also the largest shareholder.

Sarawak-based Companies: Speculation that Tan Sri Abdul Taib would resign as Sarawak Chief minister. However the potential resignation will not affect the stocks linked to him as the successor is bound to continue the steps taken by him. Even if there is a new chief minister, Taib is expected to take the role as Sarawak governor, which still be an influential position.

The term of current (Feb 2014) Head of State Tun Abang Muhmammad Salahuddin expires on Feb 28 2014.

Nonetheless, all eyes will be on Taib’s successor and whether he will bring about changes in state policies that will impact future investments.

Investors are thinking to unload these stocks now (Feb 2014) as they believed that Taib stepped down, many contracts might not be given to the companies.

The chief minister is scheduled to meet all members of the Parti Pesaka Bumiputera Bersatu Supreme Council on Feb 8 2014 and all the elected state BN MPs and state assemblymen on Feb 9 2014.

Taib is expected to use the meeting to make some important announcement and would leave it to the party’s decision making body to decide on how it should be carried out.