Minimal relief for shareholders

SHAREHOLDERS of MBSB Bank Bhd (formerly known as Malaysia Building Society Bhd) may find little consolation in the interim dividend of 2.75 sen per share announced on Dec 10 for the third quarter ended Sept 30, 2024.

The dividend is payable on Jan 5, 2025, which means individual shareholders with sizeable holdings might have to pay the new 2% dividend tax that comes into force at the start of the new year.

While MBSB’s stock price got a little boost from the announcement, it wasn’t enough to trigger a sustainable upward trend.

Instead the price chart suggests that shareholders might have to settle for a small price gain for another year (2024), despite the benchmark index rising some 10% year-to-date, with banks the major thematic behind much of the rise.

Bursa Malaysia filings reveal that the Employees Provident Fund (EPF) is the culprit behind much of the selling pressure the stock has experienced since September, which was the first time the retirement fund sold shares in the financial institution since February 2017.

The EPF, which is the controlling shareholder of the Islamic lender, has sold over 73 million MBSB shares, representing about 1.5% of its holding, which has been reduced to 56.585%.

The reasons behind the fund’s decision to sell remain unclear, but it’s evident that two decades of consistent annual profits don’t make the bank untouchable in the EPF portfolio.

Maybe the EPF wants to ensure its stake in the small “niche” lender remains at about current levels, as the shares sold so far only account for about half of the shares it received under the bank’s dividend reinvestment plan in 2021.

Maybe the current price range of 85 sen to 73 sen was an opportunity to capitalise on. The fund also appears to have opted for cash dividends over new shares in the bank since then.

If the EPF continues to sell, any potential upside to MBSB’s share price could be capped in the near term, as major investors will want to see the bank make better returns before offering enough buying momentum to drive the price higher.

Currently, only a handful of analysts track the counter and their calls are generally not exactly a glowing endorsement of the Islamic bank.