KUALA LUMPUR: Malaysia Building Society Bhd (MBSB) fell to a low of RM1.37 early Friday after its proposed a cash call which involves a renounceable two-call rights issue of new shares to its entitled shareholders to raise up to RM2bil.

At 10.15am, MBSB was down five sen to RM1.39. There were 2.42 million shares done at prices ranging from RM1.37 to RM1.43.

The FBM KLCI was up 0.61 of a point to 1,691.52. Turnover was 454.68 million shares valued at RM236.11mil. There were 191 gainers, 281 losers and 268 counters unchanged.

AffinHwang Capital Research retained its Hold rating and its 12-month target price at RM1.38. It said this was based on a 0.75 times price-to-book value (P/BV) target premised on a 9.1% CY16E return on equity.

“Ex-rights, we estimate MBSB’s fair value to be 90 sen (at a 0.66 times P/BV target), based on unchanged 2016-17E profit forecasts.

At this juncture, the deep discount of circa 41.7%-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.

“Upside risks: i) corporate exercises to enhance earnings. Downside risks: i) increased delinquency and more impairments on financing books; ii) no implementation of turnaround plans,” said AffinHwang Research.