• Overview. MBM Resources (MBMR) 4Q22 revenue surged by 16.5% YoY and 4.9% QoQ driven by higher revenue from Motor Trading and Auto  Parts Manufacturing Division which expanded by 18% QoQ and 10% YoY,  respectively. Core PATAMI plummeted by 49.3% YoY and 5% QoQ  however hurt by higher opex on the back of a rise in raw material prices and a new minimum wage.

• Key highlights. Its Motor Trading and Auto Parts Manufacturing division revenue climbed by 17.6% and 10.3% respectively, powered by an  increase in sales volume as well as manufacturing activity.

• Against estimates: Above. 12M22 core PATAMI of RM214mn came in above our and consensus forecast accounting 146.8% and 119.6% of full year forecast respectively. The deviation is due to exceptional item namely gain on disposal of asset worth RM44.8mn.

• Dividend. MBMR declared a 2nd interim and special dividend of 6 sen and  15 sen respectively pushing total FY22 DPS to 37 sen, payable on 7th March 2023. This translates into a yield of 9.8% at current market price.

• Outlook. We maintain our forecast on FY23 as we anticipate demand to normalise to pre-pandemic particularly with higher interest rate environment. Upside risks to earnings may however come from higher-than-expected vehicle demand on the back of resilient consumer sentiment, new model and facelift launches, sturdy demand for aftersales services, and cost containment measures.

• Our call. Maintain a BUY with unchanged TP of RM4.20. Our valuation is pegged at 7.1x PER to FY23F EPS of 58.6sen. Our FV is justified given MBMR’s positive outlook including its leading position in Malaysia’s automotive industry, strong brand name and continuous effort to roll out new and replacement vehicles which generally garner strong sales and after sales services.

Source: BIMB Securities Research - 21 Feb 2023