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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.
  Wyler Perodua sold 59,040 of cars from oct to dec 18; 51,105 cars from Jul to Sept 18, so it nothing goes wrong, MBMR result should improve 24/02/2019 23:00 AFMGT Wow what a quarter. Thank you Perodua for another good year of sales. Now waiting for an indepth review by commonsense 27/02/2019 20:16 commonsense Hi AFMGT, The 4Q18 PATAMI result of RM60mil was a lot higher than what I had earlier expected (I only projected a profit to shareholder of around RM40mil). This brings the FY18 profit to RM166mil. At the current price, MBMR is only being valued at a very undemanding valuation of 6.1x PE. Another positive aspect from the 4Q18 result was the strengthening of MBMR’s balance sheet with debt falling to only RM145mil vs RM280mil a year ago. The company is currently in a net cash position for the 2nd consecutive quarters. Free cash flow has also improved significantly which would provide the company with the possibility to reward its shareholders in the future by giving out higher dividend. FY19 should deliver another profit growth year to the company. Profit growth will again be driven by the performance of Perodua (via MBMR 22.6% holdings in Perodua) from the still strong sales of new Myvi, sales of SUV Aruz and the introduction of the newly revamp Alza sometime in the 2H19. Aruz which commands a higher margin compared to other models will help improve the total profit margin of Perodua (which will flow to MBMR’s bottom line as well). Given the very good result in 4Q18, I am projecting that the company will be able to achieve a profit of RM200mil for the full year of 2019 (this translate to an average profit of RM50mil / quarter). At the current share price, the company is being valued at a very low PE of only 5.1x which is a lot lower than the industry average of 15x PE. As an example, UMW (another company with exposure to Perodua) is currently trading at a PE multiple of almost 20x. Regards. 28/02/2019 08:57 OhYES Hi Commonsense, thank you so much for the info. Wondering do you hav any blog that we can follow and learn more insight from you? ^^ What would be your TP for MBMR? 28/02/2019 10:06 PureBULL . Icon8888 Monster profit 27/02/2019 18:18 ++++++++++++++++++++++++++++++++++++++++++++ MBMR, a great recovery stock. Fast n Furious is in the Play ... 28/02/2019 10:47 siowyf8888 Hi Commonsense, other than MBMR. Is there any similar or potential counter that you suggest? 28/02/2019 11:56  Connie555 Jon choivo cant tahan d he say u keep promote, are u unethical or trying to goreng... where is johnny english now i wonder 28/02/2019 14:53 commonsense Hi OhYes, Sorry, i don't actually have any blogs. i find it easier to just leaves comments on the i3 forum. For the TP i am actually hoping for the market to price MBMR closer to its peers of around 12 to 15x PE. That being said a PE valuation of 10x would already be a big improvement for MBMR. At the current share price the company is only being valued at 5.4x fwd PE (base on a target profit of RM200mil for FY19). This company has been under the radar of most investors for a long time due to the bad performance of its alloy wheel business of which the management had consistently make impairments on every 3Q and 4 Q of each financial years since FY14. However, management had decided to almost fully impaired the business in FY17 which means there will be low impairment for the alloy wheel business going forward. Any decision to disposed of the business (as to what was told by the chairman) would be a big positive catalyst for MBMR (both in terms of profit and also in terms of working capital needs). The company had also impaired most of the auto component business under Hirotako back in FY17 as well. Which also means less possibilities of further impairment in the future. Regards. 28/02/2019 16:51 commonsense Hi siowyf8888, I actually do have some companies under my watchlist and of which i am currently monitoring. However, i would like to reserve from making the recommendation until i also have some of my inquiries on the said companies answered. But to give an indication, most of the companies under the watchlist are companies that are mostly under the radar of investors and trades at very undemanding PE and PB multiples. A company that has already ample coverage would be Ewein which i first take notice back in Nov last year prior to 3Q18 result. They still have yet to announce their 4Q18 result but it should be out today. It's a property company in Penang with direct exposure to the Penang Transformation Plan Project. Their City of Dream projects is a collaboration with Zenith construction company which is the main contractor for the Penang Transportation Plan project. Valuation is cheap at less than 5x PE and 0.8x PB. However, the only issue that need to be clarified is the company's cash flows. Hopefully the 4Q18 result can shed some light on this. That being said, given the undemanding valuation i had already started to buy into the company when the share price fell to below the 55 sens level. I did made recommendation in it's forum back in Nov but i think i might have jump the gun a bit. Regards. 28/02/2019 17:10 trapped So you got trap? Why today no post? Posted by yongch > Feb 28, 2019 08:40 PM | Report Abuse So shiok today saw good price shooting up! Infact this up just beginning any time should b ard 3.0!!!!!too bad didn't bought millions of share 1.80-2.0....Heng Ah!Ong Ah!!Huat Ah!!!....shiok!!!Shiok!!!!Shiok!!!!!....kikiki...:) 01/03/2019 22:23 yongch Hahaha...bought 1.80-2.0...now juz 2.60-2.71...wait la till 3.0then sell lo...good news is 38%big boss still never give up privatise this counter woh...supposed 2.5x but not think less than 3.0cannot lo...tp 3.0!!!!kikiki...tp3.0!!! 02/03/2019 08:37 AFMGT Hey fellow value investors, Does anyone have any insights on the disposal of OMI Alloy? I know that it wont deter MBMR's growth but letting go of that small loss making unit will definitely further improve MBMR's P&L IMO. commonsense? 05/03/2019 10:17 commonsense Hi AFMGT, I think they are still negotiating with potential investors/ buyers of the asset. Negotiation has actually started since last year. From my understanding they have put an estimate 1 year as a deadline for the disposal. That being said any potential disposal can only be confirm when management decides to put OMIA as "Asset for sale" in their balance sheet. Once that is done they will have 1 year to do so. Just to inform u that OMIA losses is actually not small. In Fy17 the total core losses (excluding impairment) was at rm30mil. My estimate is that in 2018 the losses was still around rm20mil. However all of this losses is already part of MBMR patami of RM165mil. So basically, if managememt decides to disposed of OMIA, there will be an immediate jump in profit of between rm10mil to rm20mil. My projected profit of rm200mil in fy19 does not take into account the disposal of OMIA. Regards. 05/03/2019 11:08 Vincent_Tan 07-Mar-2019 Insider EMPLOYEES PROVIDENT FUND BOARD (a substantial shareholder) disposed 636,700 shares on 04-Mar-2019. 06-Mar-2019 Insider EMPLOYEES PROVIDENT FUND BOARD (a substantial shareholder) disposed 121,100 shares on 01-Mar-2019. 05-Mar-2019 Forum 3 New Comments 05-Mar-2019 Insider EMPLOYEES PROVIDENT FUND BOARD (a substantial shareholder) disposed 500,000 shares on 28-Feb-2019. 07/03/2019 22:15 commonsense Hi vincent, It's actually incorrect to say BAuto is cheaper than MBMR. When valuing a company, you need to compare the company's market capitalisation with the earnings that its generating. This can be done using the PE multiple (Share price /Earnings per share). BAuto share price of RM2.19 is earning a total of 19.08 sens in the past 12 months. This translate to a PE multiple of 11.5x. MBMR share price of rm2.63 is earning a total of 42.35 sens in the past 12 months. This translate to a PE of only 6.2x. As u can see MBMR is actually "cheaper" than BAuto by almost half. Another metrics that u can use is the PB (price over Net Tangible Assets). For every Rm2.19 share of BAuto, it is being backed by an NTA of 44 sens. This equals to 4.9x PB. For every Rm2.63 share of MBMR, it is being backed by an NTA of rm4.04 per share. This translate to a PB of less than 0.7x. Using the PB metrics, u can see that MBMR is still a lot "cheaper" than BAuto. Regards. 08/03/2019 06:04 commonsense Hi Vincent, When u want to analyse the dividend, u need to analyse the maximum payout a company can make. For a dividend to be recurring, it will need to come from the company's earnings. So in the case of Bauto, the max dividend it can pay from earnings would be 19.08sens (100% dividen payout) while MBMR max dividend the company can pay is 42.35 sens. But all this will depends on managememt decision and strategy. You seldom will see a company make a 100% dividend payout as normally they would prefer to use the money elsewhere in order to create more value to its shareholder. Some prefer to do a share buybacks (decrease the share base which result in higher eps in future), pay debt (improve balance sheet strenght and reduce future interest payment which result in higher profit), invest in new assets ( which would increase future income) etc. Basically what u do with the money will depend on the management's strategy but in general the max recurring dividend that u can pay will still depend on the company's earnings. In the case of Bauto the reason to why the dividend payout is high (in FY18 the payout ratio is more than 100%, the company is paying more div that it earns) relates mainly to the management acqusition of their controlling stake in Bauto from Vincent Tan back in 2016. They had to take a loan of around rm406mil to pay to Berjaya Corp for an additional effective interest of around 11.33% in Bauto (this increase management effective interest in Bauto from only 10% to 21.3%.). Basically Bauto management needs to pay back this loan to the bank hence why the very high dividend payment. MBMR on the other hand prefer to use the cash that it generated to pay off its outstanding debt in order to reduce the interest payment in the future which will increase the future profit further. Debt has fallen from RM375mil in Fy 16 to only RM145mil (however most of the remaining debts are actually trading debt which is backed by the company's inventories and receivables). That being said, investors should expect higher div payment in the future since now the company has more free cash flow it can used to reward investors. The potential disposal of OMIA will increase the free cash flow even further as MBMR will need less working capital to allocate to its business in the future. Regards 09/03/2019 19:06 EPF_sell We don't see MBM debts reduce. We only 3 sen dividend is maintained even QR(Profit, sales) quite good. 6/2.61=2.3% DY worse than FD or Bauto DY. 10/03/2019 13:15 sheep went up from 2.00 to 2.70.. still promoting at every counter that is losing money. forumers there not happy lah. Including me... wakakakaka 10/03/2019 15:03 Richard Lee why so susah analyse? Just ask yourself now and coming 2-3years which car brand most found on the road 11/03/2019 08:12 pharker Actually, I have read through tons of recommendations and analysis in this forum. But COMMONSENSE one is one of the most rational and supported by facts, void of emotions and nuisanse jargon. Though his recommendations may not 100% guarantee profitable trade, at least his analysis is logical and supported by numbers Anyway, thank you for the good work and sharing. I made some profitable trade in this counter based on his analysis here 12/03/2019 23:51 yongch Hahaha....Finally reach 2.80 above!!!But not yet but on the way 3.0!!!!!So shiok ah!!!!tp3.0!!!!Heng Ah!!!Ong Ah!!!!!Huat Ah!!!!!!! 13/03/2019 13:19 Sebastian Sted Power Rm2.68 disapu bersih bersih. Slow and steady. I scare limit up 13/03/2019 14:36 yongch Hahaha...tats my honey babies sweetie muah!muah!!muah!!!....tp3.0!!!!!!so shiok .....heng ah!Ong Ah!!Huat Ah!!!kikiki...babies honey sweetie coming!!!!!kikiki... 13/03/2019 15:07 GLNT MBMR so cheap. Sooner or later it will surge lah. U use PBV, PER, PEG to value, all cheap cheap. Scare off all the little guys first lah, then surge. 13/03/2019 15:24 commonsense Hi guys, Please find a summary of MBMR for the benefit of those that just got to know company as a potential investment. Apologise in advance to some as this might sound a bit of a repetition to my earlier posts. MBMR is an automotive company that has 2 core business. The first being the manufacturing of auto components (air bags, seat belt, alloy and steel wheels, steering wheels and noise, vibration & harness products). They are currently the largest manufacturer for these products in Malaysia. The second main business is the auto trading business (Perodua, Volvo, Volkswagen, Hino and Daihatsu). However, the main profit contributors to the group bottom line is actually from Perodua via its 22.6% interest in the company. Out of the RM200mil PBT recorded in FY18, more than 80% actually comes from Perodua. Hence why when analysing this company, one should actually analyse Perodua outlook first. In FY18 the company managed to deliver a PAT of RM189mil and a profit to shareholder (PATAMI) of RM165.6mil (excluding impairments it would have actually been RM173mil). At the current share price, the company is only being valued at a PE of 6.7x which is way below the industry average of 15x PE. As a reference, UMW (another company with exposure to Perodua via its 38% holdings) is currently trading at a PE multiple of almost 20x. Catalysts for the company are: 1) Still high demand for the new Myvi 2) Sales of SUV Aruz. As of February, the sales is already at 3,400 units with bookings of more than 14,000 unit. The best part is that 85% of the sales and bookings are for the higher end version which commands better profit margin for Perodua. 3) Future uplift in sales from the newly revamp Alza sometime in 2H19. 4) Sales to UMW Toyota Motor. Please take note that the Toyota Rush is actually being manufacture by Perodua. The engine of the new Vios is also currently being manufacture by Perodua as well. 5) Improvement in sales of automotive component divisions. As mentioned MBMR is the biggest manufacturer of locally assemble automotive component in Malaysia. Given the new SST structure, a lot of brands have decided to start sourcing their automotive parts components locally in order to reduce the cost from higher SST and import duty. 6) The potential disposal of OMI Alloy Sdn Bhd (the alloy wheel business) which will immediately increase the company’s profit, strengthen its balance sheet and free up MBMR’s cash flow. In FY17 OMIA recorded a core net loss of around RM30mil. I would assume the losses in FY18 was still in the RM20mil level. As an example, MBMR core profit to shareholder would have been around RM180mil in FY18 if we were to exclude OMIA result. I think the company would be able to achieve the RM200mil profit to shareholder target in FY19. Even if profit only reaches RM185 mil in FY19, at the current share price, the company would still be valued at a mere 6x PE, the lowest in the industry even though it has a direct exposure to Perodua. Most of the time, market leaders normally commands a premium vs the industry average. In MBMR case, they are actually trading at a discount of 60% (based on industry average of 15x PE) which is weird. Regards, 14/03/2019 11:32 yongch Very true sharing!!!!!TP3.0!!!Shiok shiok shiok every day for all shareholders bought below market price lo!!!!Heng Ah!Ong Ah!!Huat Ah!!!kikikiki..... 14/03/2019 14:54  Icon8888 as a matter of fact, why would I want to sell this stock at all ? it has moat, can hold long long term 15/03/2019 10:41 Richard Lee icon sifu, last Qr EPS 15 liao (belum add the Aruz taiko sales); at least coming 4QR the aruz sales will be bombard. Be conservative a bit, let say we apply back last QR EPS15 (but for sure will be higher); EPS15x4= 60. P/E 10, should be no RM6 no sell 17/03/2019 21:14  |
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