MBSB ... dated June 2008

What’s Up?

It is expected to be taken private next month (July 2008) for shareholders to transform the company into a niche player in the financial market.

Investors from Abu Dhabi, together with the Employees Provident Fund (EPF), are expected to make a general offer of between two and three times the book value of the company that would lead to the Middle Eastern investors taking a 30% stake in the company. Control would reside with EPF.

The only other substantial shareholder in MBSB is PNB with about 15% stake.

Sources say the price being mulled is between two to three times MBSB’s book value. As at end march 2008, MBSB had net assets per share of about Rm1.38.

MBSB has been plagued with NPLs (non-performing loans) for many years and, although the EPF has turned it around, the entry of a strategic Abu Dhabi investor will certainly provide a catalyst to take MBSB to the next level of growth and development with a clean balance sheet.

The shareholders are then expected to clean up the company's balance sheet by setting up an NPL fund that would buy RM1.45bil worth of NPLs from MBSB. The existing real estate portfolio within MBSB will be regrouped and, where possible, injected into a real estate investment trust. MBSB will be asset light.

Shareholders will then take MBSB in a new direction where it will set up a real estate fund specialising in medium-cost houses. The fund would buy and lease the houses to prospective homeowners for a minimum period. After a number of years, tenants would be given the option to buy the houses.

The lease-and-option-to-buy scheme is probably going to be the same cost as the current method of buying a home in Malaysia. MBSB is going back to its original cause and will be using the Middle Eastern money to stimulate the medium- to low-cost housing market.'

MBSB will earn a fee by managing the fund that will start with a size of US$1bil. MBSB also has an avenue to unlock the value of its property fund. NBSB will not carry any risk. It will get income from managing the entire real estate fund whose investors would comprise groups from Abu Dhabi and could also include the EPF.

One avenue being explored by MBSB is to take its business to the Middle East via the help of the new Abu Dhabi investors.

MBSB already has substantial plots of land and buildings which could utilised or divested to finance projects. Some of the plots which could be utilised include a 92000 sq m plot of land in Bdr Yahya Awal, JB, with a net book value of Rm61 million, a 20000 sq m parcel of land in Ampang (net book value: rm47 million) and a 57300 sq m parcel in Sungai Buloh (net book value: rm32 million).’

It has also office buildings in Lebuh Ampang, upmarket Damansara Heights in KL and a hotel in Melaka.