Investment Highlights

• We maintain BUY on MBM Resources (MBMR) with an unchanged fair value of RM4.51, based on a 9x FY21F EPS.

• MBMR recorded its best-ever quarterly core profits of RM78.3mil in 4Q20. Overall, the group’s FY20 core net profit of RM165.7mil beat our full-year forecasts and full-year consensus estimates by 15% and 14% respectively. We deem this to be within our expectations but above consensus. We are retaining our FY21–22F estimates as there are news reports indicating that Perodua is impacted by the global chip shortage, thus affecting the production of Myvi, Aruz and Alza. Overall, MBMR’s FY20 core net profit was down by 14% YoY – no thanks to the MCO in 2Q20.

• MBMR registered a lower FY20 revenue of RM1.8bil (-14% YoY) largely due to weaker contribution from its motor trading division (-14% YoY) due to the MCO, which resulted in closures of all car showrooms and service centres throughout the nation from 18 March till 4 May 2020. Despite that, MBMR’s motor trading division manage to register a stellar FY20 PBT of RM41.6mil (+84% YoY), we believe was due to outstanding demand throughout 2HFY20 bolstered by the SST exemption.

• MBMR’s auto parts manufacturing division also recorded a weaker revenue of RM178.6mil (-14% YoY) in FY20 – indicated by lower revenues of 11.9% and 14.1% YoY from Hirotako Acoustics (HASB) and Oriental Metal Industries (OMI) respectively. The division’s performance was flattish YoY, registering a PBT of RM11.3mil in FY20.

• Earnings contribution from MBMR’s associate was also lower with a PBT of RM144.8mil (-23% YoY) in FY20 compared to RM187.8mil in FY19. We reckon this was due to Perodua’s smaller earnings contribution as sales and production volume shrank due to the MCO. This was reflected in Perodua’s total sales volume of 220.2K units in FY20 vs. 240.3K units in FY19 (-8% YoY). We note that the group’s associate earnings (mainly from Perodua) contributed to about 71% of MBMR’s PBT for FY20.

• MBMR’s balance sheet remained strong with a net cash position of RM258.9mil (66.2sen/share) as of 31 Dec 2020.

• All in, we expect MBMR to continue its strong showing in 2021 – empowered by the SST exemption and the launch of the new Perodua Ativa A-segment SUV. We believe that Perodua will continue to be the market leader in the domestic auto sector because of its more attractive pricings for its model line-ups, coupled with superior value propositions. Maintain BUY.

Source: AmInvest Research - 26 Feb 2021