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Overview
Financial Highlight
HeadlinesBusiness Background MBM Resources Bhd is a Malaysian company which is in the business of motor trading and manufacturing of auto parts. It has Motor trading, Auto parts manufacturing, Property development and Others segments. Motor trading segment covers marketing and distribution of motor vehicles, spare parts and provision of related services. Auto parts segment comprises manufacturing of automotive parts and components, steel and alloy wheels and discs, noise, vibration and harshness products and provision of tyre assembly services. Property segment includes development of menara MBMR and Others segment encompass investment holding, corporate headquarter and dormant companies. Motor trading segment generates most of the revenues for the company.
  commonsense Hi Choivo, It is expected that some people might not approved of my methods. In general, what I am actually doing is marketing MBMR to the investment community. The issue that I saw with this company is that even after delivering good quarterly results and having a firm financial growth prospects, investors has yet to notice of its appeal (as highlighted by icon8888). Last month, I decided to try out a marketing strategy for the company. At the current market environment, I believe most investors are finding it difficult to find potential companies to invest in either because of the valuation (most good companies are already trading at a premium vs Bursa average) or the lack of near to mid term growth (due to various issues most pronounce is the trade war between US and China which has affected export nation like Malaysia). From there I had come up with a list of companies where the current investors might be looking to diversify their positions. If you go through the list of companies where I had promoted MBMR, mostly are: 1) companies that has been loss making for more than 2 financial year 2) companies that currently trading at high market valuation (and facing difficulties in delivering earning growth) 3) companies that are facing earnings uncertainties due to change of market environment I believe by diversifying their position into MBMR they will actually improving their portfolio strength. I will not go and promote MBMR to investors of an already good companies which I define as having good earnings outlook and decent market valuation. For example, I would not be going to RCE Capital, Freight Management, BCB, Yee Lee, Johotin, Dufu, Myeg or Ekovest to promote MBMR as it would not make much sense for the investors to sell their current positions in these companies to invest in MBMR. Most of these companies are already trading at low market valuation and their share price are mainly affected due to the market sentiment. I believe their business fundamentals are still intact and investors need to ride the short term volatility for a while (just like what happened to MBMR prior to the December rebound). In general, the reason why I believe MBMR should be added into most of the investors’ portfolio are (sorry, this will be quite a repetition for some people): 1) It’s a proxy to a strong brand (Perodua which is the market leader in its industry) 2) Domestic focus market (not effected by the current trade war uncertainty) 3) Limited client concentration risks 4) Entry level market focus. The new SUR Aruz is priced at only RM72k to RM77k. In challenging economy most, people will still need cars to move around in Malaysia. It just that some might decide to buy a cheaper brand. As mentioned before, please use Mcdonald performance during the 2007-2009 crisis as reference. Sales and profit of the company actually went up during the recession due to most people preference to go to their cheaper fast food chain vs to going to more expensive restaurant. 5) Strong balance sheet. Currently MBMR is in a net cash position. So, there would be limited risk of being pressured due to higher interest rate trends. 6) Potential financial growth in 2019 (hard to find a lot of companies being able to deliver this at the moment). Growth to be driven by still high demand of new myvi (as of sept there was still 22k firm order of myvi yet to be deliver) and the new SUV. The new SUV will actually create a new customer segment as previously Perodua customers ranges from those with RM20k to RM65k budget for a new car. Now the SUV will carve out a new customer segment of RM70k to RM80k for Perodua. Hence potentially will increase Perodua car sales numbers even further and boost its revenue and profit. The company in previous financial years was highly affected by the under performance of its alloy wheel and auto component businesses. Every year since 2015, MBMR had to make impairments (mostly in 3Q & 4Q) to reflect the deterioration of these 2 ventures. In FY17, the company had decided to fully impaired these 2 businesses which is why it had recorded a big loss of RM145 mil for FY17 of which RM250mil is actually due to impairment (so basically core pat was still at RM100mil). Management had reassured shareholders that there will be no more impairment plan going forward (they mentioned this during the AGM back in May 18. You can go through the minutes for confirmation). 7) And finally, the undemanding valuation. Currently it is only trading at around 6x PE even though the auto industry average at the moment is around 15x PE. In the end, the objective of all this is to invite people to discuss on MBMR potential as a company for them to invest in. The decision to buy or sell is still at the hand of the investors. Regards 05/01/2019 08:34 commonsense Feel free to highlight to me any errors that I made in assessing the other companies when I was promoting MBMR. I will take out my comments on the companies’ forum if the assessment made was wrong. However, I need to highlight that most of the assessments are made based on public info (mainly from bursa website). Have a nice weekend 05/01/2019 08:35  Icon8888 Maybank upgrades earning projection for MBM (3 January 2019) FYE Dec (MYR m) FY18E FY19E FY20E Core net profit 150 177 176 Core EPS (sen) 38.5 45.2 45.0 08/01/2019 08:33 Icon8888 January 3, 2019 MBM Resources (MBM MK) All pistons go! Share Price MYR 2.26 12m Price Target MYR 4.50 (+99%) Previous Price Target MYR 4.18 1. Perodua trifecta MBM is the best exposure to Perodua, benefitting as a (i) 22.6% shareholder of Perodua, (ii) dealer for Perodua cars, and (iii) auto parts supplier. Imputing a sales boost from Perodua’s new Aruz model, we raise FY19/20 net profit forecasts by 8%/6% respectively. We also raise our TP to MYR4.50 (+8%), rolling forward valuations to FY20 on unchanged 10x PER peg. MBM is our second favourite auto stock after UMWH. BUY. 2. A boost on FY19/20 earnings from Perodua Aruz We now include contribution from the SUV Aruz model (2k/1.5k units monthly for FY19/20 vs Perodua’s target of 2.5k units monthly) into our earnings model. Partially offset by expectation for lower sales of the other models (i.e. Myvi, Bezza and Alza – see Fig. 2 for our revised assumptions), we raise MBM’s FY19/20 earnings forecasts by 8%/6% respectively. Eyes will be on the booking and delivery of this model, to be revealed frequently in the next few months. Consistent outperformance could present further upside to our earnings forecasts. 3. Strong results will not end in 3Q18 Perodua has already achieved its 2018 sales target of 209k units in 11M18 and is poised to exceed our 220k-unit (+7% YoY) assumption by 3-5%; for this, we expect MBM to report further sequential earnings growth in 4Q18 from already a solid quarter in 3Q18. This would help MBM close the year on a new high; beating its 10-year high of MYR142m net profit in 2010. Into 2019, the introduction of the new Perodua Aruz and Toyota Vios and Yaris models should also offer further opportunities for MBM’s alloy-wheel plant; recall that the new Toyota Rush, launched in Oct 2018, is a CKD model rolling out of Perodua’s plant. These factors should help MBM climb a step further in 2019 as well. 4. Underpriced at 5x CY19 PER currently Despite recent climb in share price (+17% in the last one month), MBM is still very much undervalued; its 22.6% effective stake in Perodua alone is worth ~MYR2.2b (based on 13x FY19 PER to our revised Perodua earnings of MYR737m in FY19), 2.5x of MBM’s current market cap. 08/01/2019 08:37 mneo If the new SUV,Aruz, for MBMR is selling better than proton x70.. it will be a good future growth for MBMR... 09/01/2019 08:11 yongch No worries..it's 100%better than any of local car maker!!!!72k for familys SUV,where u can find???just this price no others can beat lo!!!!tp3.0!!!!kikiki...another big AngPow before CNY!!!! 09/01/2019 20:05  VenFx Share Price MYR 2.26 12m Price Target MYR 4.50 (+99%) Previous Price Target MYR 4.18 ME : SIFU GIVE STRAIGHT ANSWERED TIP... I LIKE IT. 09/01/2019 20:20 VenFx Ok ! My 1st tip received from icon8888 sifu. Full blessing in MBMR ! 2019 got newToyota Rush,with supplement from MBMR . Thank you dulu ! 09/01/2019 20:26 Icon8888 https://www.thestar.com.my/business/business-news/2019/01/12/eyes-on-mbm-as-auto-sector-poised-for-a-rebound-mbm-poised-to-ride-on-recovery-in-auto-sector/ 12/01/2019 13:16 commonsense Perodua just officially launch the new SUV Aruz yesterday. The SUV has already 2,200 bookings. Management is targeting to sell around 2000- 2500 units per month (total annual target of 30,000 units) which will increase Perodua sales by more than 10% when compared to FY18 target sales of 209,000 cars (even that was achieved in Nov. New target should be around at least 225,000 units). In general the SUV should deliver a higher profit margin when compared to its other offering. This would benefit MBMR directly given its exposure to Perodua via its 22.6% equity interest. Given the RM145mil profit target for FY18 (9m18 is already RM106mil), MBMR should be able to reach a profit to shareholder of around RM160mil in FY19 (an improvement of around 10%) backed by: 1) Sales and profit of the new SUV Aruz which as mentioned above will add more than 10% to Perodua annual sales. 2) Turnaround of alloy wheel manufacturing which will see an increased in production from the new Perodua SUV but more importantly the collaboration with China's biggest alloy wheel manufacturer Citic Dicastal. MBMR will help produce alloy wheels for Citic for its European market. 3) Still high demand of the new Myvi as shown by the Oct and Nov 18 sales (hopefully Dec as well). 4) The launch of the all new revamp Alza expected in 2H19. At the current share price, the company is only being valued at a forward PE of 6.1x which is a lot lower than the industry average of 15x. Regards 16/01/2019 06:10 Icon8888 https://cdn1.i3investor.com/my/files/st88k/5983_MBMR/pt/MIDF/5983_MBMR_MIDF_2019-01-16_BUY_3.80_MBM%20Resources%20-%20Cheapest%20Proxy%20to%20Perodua%20TIV%20Expansion_-303948875.pdf 17/01/2019 04:43 commonsense Guys, Some updates on MBMR. It seems that management had decided to sell off the loss-making alloy wheel business instead of trying to turn it around via collaboration with Citic Dicastal which is actually a better decision for MBMR’s shareholders. Reason being: 1) The disposal of the business would improve MBMR’s future profit since it is still currently generating losses to the group in FY18 albeit at a lower level compared to previous years. Even with the collaboration with Citic, management was only expecting for the operation to either breakeven or post small profit. 2) Any sales of the business would most probably result in a gain on disposal for the company given that most of the investment has already been impaired in the company’s balance sheet. 3) The disposal will free up more cash in the future that could potentially be used to reward shareholders by paying higher dividends. Total Perodua car sales in 4Q18 was at 59,040 units which is a growth of 10.8% vs 4Q17 and 15.5% vs 3Q18. This brings the total Perodua car sales in FY18 to 227,243 units which beats management official target (of 209k cars) by 8.7%. With this result, the company should be able to deliver a core profit to shareholders of around RM145mil to RM150mil for 2018. As mentioned previously, growth in FY19 would be driven by the still high sales of new Myvi, the 30k units target sales of the new SUV Aruz and the introduction of the newly revamp Alza in 2H19. With these, MBMR is expected to deliver a profit to shareholder of around RM160mil to RM165mil in FY19. Regards and have a nice long weekend. 19/01/2019 01:12 megatti_maf Morning. Read the article on the edge over the weekend on the disposal of aloy wheel plant. Wonder how much if the profit jump after the disposal? 22/01/2019 09:07 commonsense Hi Megatti, If you look at segmental reporting of 3Q18 result you would see that the total PBT of the auto parts manufacturing segment amounted to RM3.3mil. Excluding the result from associates (Hino Motors Manufacturing) and JV (Autolive Hirotako), the remaining auto component business actually recorded a loss of around RM9.1mil. This represent a combined contribution from both Hirotako Holdings and Oriental Metal Industries (of which the alloy wheel business is park under). From my understanding, Hirotako has always been able to deliver profit to MBMR which means that the minimum losses from OMI should be around RM9.1mil of which mainly comes from the alloy wheel business (Here I am assuming Hirotako contribute a minimum of RM0 to the company’s PBT). Based on this, we can assume that OMI losses to MBMR should be at least around RM10 mil for the full year of FY18. If management decides to sell the alloy wheel business, investors can expect the profit of MBMR to increase by at least RM10mil once the disposal takes place. Using the target profit of RM145mil in FY18 before disposal, MBMR profit for FY18 could be higher at around RM155mil. If management managed to disposes of the business in FY19, I expect the full year profit for the year to increase from the original projected profit of RM160mil to RM170mil. This would mean at the current price, MBMR is actually only trading a PE valuation of less than 6x vs the industry average of 15x PE. Regards. 22/01/2019 10:06 commonsense Hi megatti, Kenanga however actually estimates the losses from alloy wheel at rm23 -26 ml per annum. So for them, the earning boost from the disposal will be a lot higher than my own assumptions. Regards. 22/01/2019 10:23 yongch Hahaha....now started so many high look expect this counter...ok la jus waiting for 3.0 then let your big players continues lo....kikiki...every day so shiok looking at slowly climbing up up up!!!!tp3.0!!!!Chinese New Year Ang Pow around the corner ..Huat ah!Heng Ah!!Ong Ah!!!! 22/01/2019 13:45 Icon8888 MBM gives angpao 3 Sen dividend Thank you commonsense for the excellent pick 23/01/2019 19:20 commonsense Hi icon8888, Hopefully the company can pay higher dividend in FY19 given the better profit projection for FY19 (driven by the performance of Perodua) and the potential disposal of the alloy wheel business. In previous financial years, cash were needed to invest more on the alloy wheel plant (to improve its efficiency) and also to pay off most of the company's debt. The company is currently at a net cash position after having reduce debt to only RM193mil from RM416mil back in FY14. The potential disposal of the alloy wheel business will definitely create more free cash (due to lower working capital requirement and lower capex spending) for the company which could be used to reward its shareholders by higher dividend payment. Regards 24/01/2019 06:27 Icon8888 Perodua eyes 4% rise in annual sales after record 2018 BY EMIR ZAINUL KUALA LUMPUR: Perusahaan Otomobil Kedua Sdn Bhd (Pero- dua) wants to score another year of record sales in 2019 — with a 4% increase in sales to 231,000 units — after it achieved its best annual sales tally of 227,243 units last year. Perodua president and chief executive o cer Datuk Zainal Abi- din Ahmad said the improvement will be driven by the Myvi and the newly introduced Aruz. “Perodua’s aim to boost its sales by 4% this year will not only strengthen the brand but offer some relief to the Malaysian car industry, which is forecast to grow very minimally this year,” he said during the company’s Chinese New Year luncheon with the me- dia yesterday. (The Edge) 24/01/2019 06:58 BULL1000BEAR1000 Myvi engine fit in Aruz! Are you serious? Selling for 70+k lagi hahahaha. Let's also have a look at the Underpowered Avanza. 24/01/2019 17:55 Dylan Yong Hua Tai Bull,... Avanza, Vios, Myvi, Aruz all use same engine. ... sama biji. So if you buy Avanza actually same as Myvi 1.5.... hahah 28/01/2019 13:23 money888
MBMR has been trading above its upward sloping 20-Day Moving Average which is a good sign. In addition, the price just broke the resistance of 2.38 reinforcing the bullishness in the recent price movement. This breakout was accompanied by a higher than average traded volume which shows the enthusiasm of the traders to push the price higher and past this resistance hence giving a higher probability of a successful breakout. https://au.i3investor.com/blogs/aux/2904.jsp 06/02/2019 08:56 Icon8888 https://cdn1.i3investor.com/my/files/dfgs88n/2019/01/31/1509832573--1989443369.pdf 07/02/2019 11:04 commonsense Hi Guys, Some update on Perodua (indirectly MBMR). Perodua started out the year with a very encouraging sales of 20,100 cars in January 2019 which is an improvement of 13.6% vs January 2018 sales of 17,700. Aruz sales number for its first month was at 1,025 units which could have been a lot higher if not for the delay in the registration process. This issue has since been resolve. Recent bookings numbers for the new SUV is at 8,000 units which very encouraging. Sales of the SUV should pick up pace starting in February. 4Q18 result is expected to be out by the end of this month. Hopefully with the total Perodua sales of 59,040 cars during the quarter (an improvement of 10.8% vs 4Q17 sales of 53,307 units), MBMR could post a 4Q18 profit to shareholders of around RM40mil to bring the total FY18 profit to RM145mil. At the current share price, the company would only be valued at 6.9x PE. Currently, MBMR is still consider as a “loss making” company (even though core operations are actually profitable) under some investment platforms like Bloomberg, Thompson Reuters, bursamarketplace and even i3investors due to the large impairment exercises made in 4Q17. This is because the platforms depend on reported earnings which would include one off items and non-operational items like gain/loss on disposal, impairment, fair value gains etc when compiling data performance of a company. This has limited the appeal of MBMR to some of the investors as they would think that the company is a loss-making company. With the expected 4Q18 result, MBMR would officially be taken out of the “loss making” or “negative PE” categories and hopefully would invite more investors to look at MBMR. Regards 09/02/2019 09:57 Icon8888 They target to sell 30,000 Aruz this year , right ? Now after one month launch already 8,000 09/02/2019 16:48 VenFx Appreciates for Icon8888's bro kindness in delivery on time facts from his observation . 09/02/2019 18:24 commonsense Hi Lim, I would not worry too much in terms of MBMR financial performance going forward. 4Q18 is expected to deliver good results driven by Perodua car sales numbers (refer to my earlier post). In January, Perodua managed to only deliver 1,025 Aruz mainly due to delays in registration process. Bookings as of Jan for Aruz was 8,000 units. The issue has been solve. As of today, a total of 4,000 Aruz has already been delivered. I would expect better car sales numbers in Feb. As mentioned earlier, FY19 growth would mainly be driven by growth in Perodua sales of which Aruz will contribute to a better profit margin mix to Perodua and indirectly MBMR. My target profit to shareholder for FY19 is RM170mil which would meant at the current price the company is only being valued at a mere 5.7x PE. If the company managed to disposed off the Alloy wheel business, expect a further boost in profit by at least RM15-20mil per year post disposal. More importantly the more free cash that the company would have post disposal (from less working capital needs) which could be used to reward shareholders by better dividend payment. There should not be any more impairments for the business given that the remaining asset value (RM35mil as of Dec 17) for the alloy wheel is mainly related to the land value (which normally you don't impair). All the major impairments were done back in FY17. Regards, 12/02/2019 10:56 Icon8888 Gongxifacai commonsense very grateful for your MBM Buy Call benefited a lot of people 12/02/2019 10:59 commonsense Hi Icon, Gongxifacai to you too. Hopefully after the 4Q18 result, market will start to take notice of MBMR. Too cheap for a company that has exposure to Perodua. Just look at UMW, the other company with exposure to Perodua. They are trading at more than double to that of MBMR. Anyway, hope you make a lot of money this year. Good luck. 12/02/2019 12:24 commonsense Hi qqq3, I actually made a comment on E&O back in January. But it was mostly on its valuation. Back then it was trading at around RM1.07 or a market cap of more than RM1.4bil which i thought was a bit on the high side given it's earnings outlook for FY20 (projected profit of around RM70mil). At that price it would have translated to a fwd PE of 20.7x which is a lot higher than the average property industry PE. Just like most other property companies, E&O is currently trading at a discount to its book value. That being said, if you still like to have exposure to the property industry, i think you can find better value companies at the moment. As an example, there is a property developer in Klang Valley that is also trading at below 0.5x PB just like E&O. However, the company balance sheet is a lot stronger, with cash that represent 25% of the company's market cap and with zero debt. Some of the lands in the company's book has not been revalued for more than 20 years with market value estimate to be more than 10x what it recorded in the books. There are even some property companies that currently trading at below 5x PE and below 0.5x PB albeit at a market cap that is a lot lower compared to E&O. Most of the value property companies are in the mid and small cap. I was a bit surprise with the company announcement of the right issue exercise as i thought any future funding can be done via the sales of assets/ reclaim lands. Anyway, if you decide to buy into E&O today, i would advice you to subscribe to the right issue to prevent any future dilution and also be able to benefit from the issuance of the free warrants. Given the minimum target amount to be raised from the exercises is RM250mil and the and assuming the private placement can raised 10% of the current market cap (translating to around RM130mil), the right issue will need to raise around RM120mil. This means you will need to be prepared for an additional cash investment of at least RM0.09 per share (based on the 4 ordinary shares to 1 rights, the price of the rights would be RM0.37 per rights). Basically if you buy the stock at RM0.85 today, you will need to prepare another 9 sens for your future right issue subscription. Which means your total investment into E&O is actually RM0.94. Again this is based on the minimum case scenario. The maximum case is for the company to raised up to RM550 mil, again assuming the private placement raises RM130mil, this would mean the right issue needs to raise around RM420mil. This translate to an additional RM0.32 per share (or right issue at a price of RM1.28 based on 4 ordinary shares to 1 right issue ratio). This would mean your total investment of E&O is actually RM 1.17 per share. However to entice investors to subscribe to the right issue, most of the time the company need to price the right issue at a discount to the price of the ordinary share ( if not people might not want to subscribe). Assuming the price of the shares ends up at around RM0.90 before the price fixing date, and assuming a discount of around 10%, i would assume the most optimum case is for the company to fixed the right issue price at around RM0.80 (the company would end up raising around RM400mil of cash from both the PP and RI exercises). This would mean you need to prepare an additional RM0.20 per share of your original investment of RM0.85 bring your total investment in E&O to RM1.05. In conclusion, you need to make sure to prepare at least 20 sens extra per share for you to subscribe to the right issue. Sorry for the long post. Hope you understand it. Good luck. 13/02/2019 11:51 qqq3 sense... RI 1 for 4 is ok....not like Sapura 4 for 1..... If it does not work out, I will go the distance, maybe average down a few days later.....if it works out , I may sell....RI with warrants....makes good sense to me.... I do not want exposures to properties per se......other property shares with better BV/ price no interest.....reputation is more valuable than BV. Some investments in E&O ok one...... anyway....I am looking for more details......thanks..... 13/02/2019 12:07 qqq3 icon dont sell so fast one.... mbm is attractive but not a contrarian stock.....same like Serba.... actually between MBM and Serba.....which is prefered? both are known as promoted stocks......both are known as hot favorites.....not contrarian stocks....... osted by qqq3 > Feb 13, 2019 12:25 PM | Report Abuse X maybe I too should choose one....Serba or MBM? 13/02/2019 12:28  |
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