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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