Kinda old news ?

ETALING JAYA: The Employees Provident Fund (EPF) is considering privatising Malaysia Building Society Bhd (MBSB) as it intends to do much more with the residual properties of the non-bank lender, reliable sources said.

“The EPF is looking to unlock the values in the properties that MBSB has,” said the source.

The EPF owns 65.5% of MBSB, while institutional fund Permodalan Nasional Bhd is the second largest shareholder with 7.26%.

Based on MBSB's 2010 annual report, the company has 9.21 hectares (ha) in central Johor Baru and another 16.9 ha in Malacca.

These pieces of land carry a book value of some RM169.2mil but analysts say they are worth much more now.

Besides that, MBSB also has a few pieces of land in Sungai Buloh with a combined area of 5.73 ha and a book value of RM31.9mil.

These properties were inherited by MBSB as many of its delinquent loans of the past were backed by properties in good locations.

“The Johor land is particularly valuable given its proximity to Johor's coastline where big plans are being unveiled by the state for a massive integrated waterfront development,” said one analyst.

He added that any plans to develop MBSB's residual properties would tie in nicely with the EPF's plans for its unit called Kwasa Land Sdn Bhd.

This 100% subsidiary of EPF is the master developer of the Rubber Research Institute Malaysia land in Sungai Buloh. MBSB's list of properties came about after the lender had ventured in a big way into financing real estate development in the 1990s.

MBSB had adopted the business model to buy and develop land by itself, with the intention to finance the purchasers of the properties.

However it did not have the necessary expertise and management skills to execute its plans.

Its non-performing loans (NPLs) stood at 59% in 2002, which stood at about RM2bil, and has gradually been brought down to the current level of 8%.

In a recent analyst briefing, the management of MBSB had also provided guidance that it would strive to reduce their net NPL ratio to between 5% and 6% in 2012, which is substantially below its current level.

Ultimately chief executive officer Datuk Ahmad Zaini Othman wants to lower its NPL ratio to just between 2% and 3%, definitely not a small feat if one looks at the ratio that stood at 19% back in 2009.

Recently, the lender posted RM325.4mil as net profit for its full year ended Dec 31, 2011, more than doubling the RM146mil it achieved in the previous year, driven by a loan growth of 22.8%.

Analysts are bullish on MBSB given its recent turn of fortunes and the recent civil servants' pay hike which bodes well for the company.

“The restructuring of MBSB's NPL has been a very good turnaround job, and its focus now on personal finance had improved the business direction of the company,” he said.

According to AmResearch, MBSB's gross loans recorded an annualised growth of 31%, with the main driver being the personal financing segment, which grew at an annualised rate of 136%, above its forecast of 100%. “Personal loans made up 40% of MBSB's total loans in second quarter 2011, compared with 28% in fourth quarter 2010,” it said.

OSK Research also said MBSB would be able to entice the more affluent civil servants to take up loans by offering more innovative products to them moving forward.

“We think that once their master agents are fully trained up to attend to these customers, MBSB will be able to monetise their innovation on this group of discerning customers whom we think will require more servicing,” it said.