KUALA LUMPUR (Sept 17): For the first time in more than two years, MBSB Bhd (KL:MBSB) has received a “buy” recommendation, with RHB Research upgrading the stock for its high dividend appeal.

The financial services firm has excess capital which could be addressed with above-industry financing growth and elevated dividend payouts, RHB Research flagged, noting that the house is now more comfortable to assume a 90% dividend payout after the third consecutive payout near that level.

MBSB could “generate sector-high” dividend yields of 8%-10% for 2025-2027 based on its latest projected earnings, the research house said and raised its target price to 79 sen.

Common equity tier 1 capital ratio, a measure of a bank’s capital strength based on the highest quality of regulatory capital, came in at nearly 20% as of June. MBSB declared two sen per share dividend in August, which represented a distribution of 91% of its profit after tax.

Shares of MBSB, formerly known as Malaysia Building Society Bhd, are still down by about 5% so far this year, after the rebound from April lows. MBSB is the holding company for MBSB Bank, a fully domestic lender focusing on Islamic banking services to retail and businesses.

A low return-on-equity of under 4% has also sidelined investors, while three other analysts covering MBSB have the stock on “hold” calls. On its part, the company is targeting to raise the measure to 5%-6% for this year.

“We think the stock is worth a closer look,” RHB Research said.

The impact from July’s policy rate cut could be “mild” near-term on MBSB, and cushioned by financing growth acceleration and its deposit structure that are dominated by fixed deposits, the research house said.

“We now turn more positive on MBSB and promote it as our preferred domestic-only bank,” the house added.