business
MBSB’s cash call may lead to 40% EPS dilution, says Affin Hwang
Malaysia Building Society Bhd's (MBSB) planned rights issue of new shares to raise up to RM2 billion may dilute earnings per share (EPS) by up to 40%, according to Affin Hwang Investment Bank Bhd.
In a note today, Affin Hwang said anticipation of financial services entity MBSB's EPS dilution, could spark a selldown in its shares.
“We keep our “hold” rating and price target on MBSB unchanged at our 12- month target price at RM1.38, based on a 0.75 time P/BV target premised on a 9.1% CY16E returns on earnings. Ex-rights, we estimate MBSB’s fair value to be 90 sen (at a 0.66x P/BV target), based on an unchanged 2016-17E profit forecasts.
“At this juncture, the deep discount of circa 41.7% to 43% in the first call subscription price (82 sen to 84 sen) to its current share price appears to be fairly attractive, but could potentially spark a selldown of the shares, given this dilutive capital raising exercise,” Affin Hwang said.
At 11.03am, MBSB shares fell five sen or 3.5% to RM1.39, for a market capitalisation of RM4.09 billion. The stock saw some three million shares traded. – The Edge Markets, March 11, 2016.
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