We reiterate our BUY call on MBMR with a slightly higher fair value of RM5.10/share (from RM5.00/share previously) by pegging to a FY22F target PE of 8.5x – 2.0 standard deviation above its 5-year average of 7x on robust prospects. We make no changes to the neutral ESG rating of 3 stars.
MBMR’s 9MFY22 core net profit (CNP) of RM172mil came in above expectations at 79% of our FY22F net profit and 80% of street’s. In comparison, 9M accounted for 55%- 79% of full-year CNP before the pandemic periods (FY18-FY19).
As such, we raise our earnings by 7% for FY22F, 9% for FY23F and 14% for FY24F on higher Perodua sales assumptions.
YoY, the group’s 9MFY22 revenue rocketed 71% to RM1,657mil as motor trading operation rose 70% to RM1,423mil and auto parts manufacturing increased 78% to RM232mil. Accordingly, 9MFY22 CNP went up 2.9x YoY, partly supported by a reduction of 24% YoY in operating costs.
3QFY22 topline surged 2.7x YoY due to tremendous performance in motor trading (+2.6x) at RM529mil and auto parts manufacturing (+3.2x) at RM92mil from a low base effect last year affected by lockdowns. Consequently, 3QFY22 CNP swung around to RM60mil from a loss of RM5mil in 3QFY21.
During the quarter under review, the vast improvement in associates/JV (+8.8x YoY) to a combined RM52mil alongside improved aftersales service margins also contributed to the CNP turnaround.
QoQ, MBMR posted an increment of 12% in 3QFY22 topline mainly supported by auto parts manufacturing business (+29%), boosted by increased supply from Perodua.
However, lower results from a slight shortfall from motor trading (-3%) and reduced share of associates (-41%) caused 3QFY22 bottomline to rise only marginally by 4%. Motor trading contribution retracted sequentially due to lower stock supply from Volvo.
We are positive on MBMR’s near-to-medium term outlook due to: 1) robust sales from Perodua; and 2) upcoming model roll-outs.
The company is currently trading at an undemanding valuation of 6x FY22F PE, one notch lower than its 5-year average of 7x.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....