Investment Highlights

• We maintain BUY on MBM Resources with an unchanged FV of RM2.87/share based on an FY19F PE of 9.5x.

• MBM announced last Friday that its president and CEO Nor Hadi Daud is stepping down due to retirement. He had been appointed to this position in March 2017.

• Muhammad Iqbal Shaharom will take over as acting president and CEO from today. Iqbal has served MBM as the vice president of trading (namely for Federal Auto and Daihatsu Malaysia Sdn Bhd) since Jan 2018 and the managing director of Daihatsu Malaysia since April 2017.

• He previously served in various roles in the top management of DRB-Hicom (as COO of Hicom Holdings), Chery Automobile (as deputy CMO, leading the penetration of the Chinese brand into Malaysia) and Naza Group (as head of sales for KIA cars here, and later the VP for Naza Quest to focus on Chevrolet), we gather.

• On his background, 61-year old Iqbal has a bachelor’s degree in business administration and MBA from the University of Toledo, Ohio. He received a doctorate in business administration from University Utara Malaysia.

• While the change in leadership just as OMI is starting to recover could be a concern, we understand that Hadi may still serve the group in some capacity and prioritize more strongly on the turnaround in OMI. Meanwhile, Iqbal would have the bigger task of managing the group given his expertise in trading and sales.

• Recall that OMI aims to raise its utilization rate to 56% by year-end from 50% at end-2017 with higher orders from Perodua. It will supply for the new SUV, in addition to the existing supply for Axia, Myvi and Bezza. OMI has improved its efficiency by cutting its rejection rate, trimming its staff force and reducing the number of orders on hold. The OMI plant is in the process of qualifying for a potential tie-up with China’s Citic Dicastal, as we noted in May.

• We believe this would have no impact on the existing negotiations between MBM’s parent Med-Bumikar and UMW Holdings. One of the key issues UMW has to to resolve by end-Oct is the disagreement from Daihatsu Japan (the principal), a different unit from Daihatsu Malaysia or DMSB, which is a 51.5% subsidiary of MBM.

• We maintain our earnings projections and FV for MBM.

Source: AmInvest Research - 2 Jul 2018