Investment Highlights

• We keep our BUY on MBM Resources Holdings (MBMR) with a same fair value (FV) of RM5.22/share based on an unchanged FY23F target PE of 8x – 1.0 standard deviation above its 5-year average of 6.2x. No changes to our neutral 3-star ESG rating.

• We made no changes in our assumptions following an analyst briefing yesterday. Below are the key takeaways:
  
  -> In terms of FY23F prospects, earnings will be supported by its large order book and continuous launches of Perodua cars. Margin-wise, management expects a marginal easing or relatively steady level amid high operating costs driven by higher raw material prices and increase in minimum wage.
  
  -> Our checks show that the moderation in commodity prices such as steel and aluminum have shown a reversal trend since October 2022. Nonetheless, we expect the lagging effect of the moderation seen in 2022 to provide some buffer in FY23F, as it takes 3 – 6 months to be reflected in the bottomline.
  
  -> Taking a cue from the management’s guidance that Perodua could have performed even better in 4QFY22 in the absence of labor shortages, we think more headcounts moving forward could bolster its production and therefore more vehicle supplies to dealers – a boon to MBMR being the largest dealer for the carmaker.
  
  On a side note, Perodua is currently producing 1,200 units per day, targeting to maximise its production to 330,000 units (+14% YoY) in 2023.
  
  -> On new launches, we gathered that Perodua remains committed on the hybrid model (tentatively in 2024), in which Ativa Hybrid – a rebadged Daihatsu Rocky from Japan (limited at 300 units) - was brought in for longterm study to gauge consumers’ acceptance level. Even so, an all-new model for FY24 will still carry an internal combustion engine (ICE).
  
  -> While it has been reported previously that Perodua plans to absorb sales and service tax (SST) payment for spillover orders beyond 31 March 2023, MBMR guided that not much discussion was made at the current juncture.
   
• The group currently trades at a compelling FY23F PE of 5.5x, hugely discounted from its 5-year peak PE of more than 9x with a strong dividend yield of 8%.

Source: AmInvest Research - 22 Feb 2023

Source: AmInvest Research - 22 Feb 2023

Source: AmInvest Research - 22 Feb 2023

Source: AmInvest Research - 22 Feb 2023