Malaysia Building Society Bhd - Why the 63% increase in Other Emoluments for its directors?

24/4/2014 – The management of Malaysia Building Society Bhd (MBSB) says the growth of its personal financing and mortgage portfolios will be more challenging in 2014.

It lends money to individuals and companies, and takes deposits from them.

It says its personal financing segment will continue to be the main driver of asset growth in its retail segment, although it will show a slower growth rate.

It is also working on expanding its corporate segment as it believes it will contribute positively in terms of assets and earnings growth while diversifying its assets base.

Overall, the group expects performance in 2014 to be satisfactory, without quantifying what this means.

MBSB is an exempt finance company, meaning it can lend money without a bank license.

The company just announced earnings for Q4 FY13:

Revenue: +43% to RM 695.5 mln
Profit: -27% to RM 133.5 mln
Cash flow from operations: RM 1.75 bln vs (RM 555.6 mln)
Dividend: 5 sen per share vs 4.5 sen per share

The management of MBSB said the increase in profit for the quarter was mainly due to higher profit contribution from its Islamic operations, which came from growth of its personal financing portfolio and lower impairment losses on loans, advances and financing.

This was partially set off by higher other operating expenses and lower other operating income.

Investor Central. Asian insights for global investors. We ask the tough questions of Asian companies which global investors need answers to.

1. Why the 63% increase in “Other Emoluments” for its directors?

MBSB has called for an annual general meeting where it will propose to approve the payment of its directors’ fees of RM 586,667.

This is a gradual increase from RM 560,000 in FY12.

But on page 174 of its recently-released annual report, its Other Emoluments to be paid to the directors increased to RM 487,000 from only RM 298,000 in FY12.

That is an increase of about 63%.

The figure increased by only 25% to RM 298,000 in FY12 from RM 237,000 in FY11 (page 171 of 2012 Annual Report).

And it was up just 6% to RM 237,000 in FY11 from RM 224,000 (page 142 of 2011 Annual Report).

Now, in the context of revenue and profit running into the hundreds of millions of ringgit, these are small amounts.

But what exactly are these so-called “Other Emoluments”?

Why did it increase its Other Emoluments for its directors by such a high figure in FY13?

2. What is its portfolio focus now?

Bank Negara Malaysia’s tightening measures to curb household debt have impacted its personal finance business.

According to what management told RHB during its Tokyo roadshow recently, MBSB is now choosing to focus on corporate lending and targeted segments for its retail portfolio.

Before this, it had said late last year that it was aiming for a 60:20:20 ratio for its personal finance:mortgage:corporate portfolio.

Now that it is focussing on corporates, what is the intended ratio?

Total number of questions in the full story: 8)

We have sent these questions to the company (corporate.planning.department@mbsb.com.my) to invite them for an on-camera interview, and/or seek their written response.

So far, we have not had a reply (which is why you are seeing this message).

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