Investment Highlights

• Maintain HOLD on MBM Resources (MBM) with an unchanged fair value of RM3.99/share (based on FY24 PE of 8x − 1SD above its 3-year mean) and forecasts for now pending updates from management in an analyst briefing later today. Our neutral 3-star ESG rating remains unchanged.

• MBM delivered stronger-than-expected results with a 4Q23 core PATAMI of RM98mil (+71% YoY) that brings FY23 core PATAMI to RM335mil (+46% YoY), exceeding ours and consensus estimates by 22%/21%.

• No 4QFY23 dividend was announced compared to a 21 sen DPS paid in the same period last year. Management did not provide a reason, likely prompting inquiries during the briefing.

• We think the weaker cash flow in 2023 (due to spotty car supply in mid-2023) has led to the no 4Q dividend decision. MBM’s net cash has reduced by RM88mil YoY to RM197mil at the end of 2023, which is the lowest level since 2018.

• Strong performance is credited to robust Perodua sales as supplies from Japan improved. MBM recorded +17% YoY growth for Perodua cars in 2023, with little to no discounts & incentives conferred to customers. However, demand for Volvo, Volkswagen and Daihatsu is challenging despite heavy discounting and incentives.

• Due to firm ASP and minimal incentives for the-top selling Perodua products, net margins surged by 3.9%-point YoY to 13.8%, setting a new record.

• The outlook statement cautions on the impact of high living costs and new taxes. It is obvious that 2024 will be more challenging than 2023 and the key risk is if OPR goes higher. On the supply side, it appears that shipments from Japan are improving.

• The stock currently trades at a fairly-valued FY24F PE of 9x, above its 3-year mean of 6x.

Source: AmInvest Research - 29 Feb 2024