Investment Highlights

• We maintain BUY on MBM Resources (MBMR) with a lower fair value of RM4.32, based on an unchanged 9x FY21F EPS.

• We cut our FY20–21F net profit forecast by 6% and 7% respectively to account for the delay in the launching of a key model – which is the Perodua D55L 5-seater SUV.

• Key highlights from MBMR’s analyst briefing:
  • 1) The launch of the unnamed Perodua D55L 5-seater SUV will be delayed. Management has tentatively guided for a 2021 launch and we now expect it to be in 2QFY21. We believe that Perodua is likely to set a lower price point for the model compared to the Proton X50.
  • 2) The group reiterated that it will be retaining its dividend payout policy of 60% on company level for FY20F amidst the pandemic. Based on our projections, this will translate into FY20–21F DPS of 14.7–19.2 sen and dividend yields of 4.6–6.0%.
  • 3) Perodua has ramped up its monthly production volume to about 25.0K/month to cater for the uptick in demand for its vehicles due to the SST holiday. We gather from various news reports that Perodua sold a total of 21.3K units and 23.2K units of vehicles for June and July 2020 respectively. We note that Perodua sold an average of 20.0K units/month in 2019.
  • 4) The group was initially looking to secure more distribution and dealership ventures with other brands; namely Suzuki, Mitsubishi and Hyundai. However, due to the current macroeconomic downturn, the group has highlighted that it will not go ahead with these ventures until there is greater clarity of the market conditions. We understand that capex and investment allocations to manage the distribution of new brands are costly though management has not indicated on the quantum.
  • 5) There were indications that the Proton is slated to be launched in 4QCY20. MBMR will be supplying seatbelts to the model via its 100%-owned Autoliv Hirotako.

• We expect MBMR to record a stellar recovery in 2H20, empowered by the implementation of the SST holiday from 18 June till 31 December 2020. Our BUY call is also premised on the belief that Perodua cars would recover more quickly compared to other brands due to its more attractive pricings for its model line-ups and value propositions.

Source: AmInvest Research - 24 Aug 2020