KUALA LUMPUR (Aug 29): Shares of MBM Resources Bhd (KL:MBMR) extended their rally to a new all-time high on Thursday while analysts raised their targets after the automotive company’s better-than-expected results and a surprise special dividend.

MBM rose as much as 22 sen or 3.9% to RM5.89. At 3.30pm, the stock was trading at RM5.87, giving the company a market capitalisation of RM2.29 billion. Trading volume totalled 1.3 million shares so far, nearly double the 200-day moving average.

At least four research houses raised their target prices for the stock as net profit for the January-June period accounted for 54% of the consensus full-year estimate, and drew comfort from strong orders for Perodua cars.

“We expect MBM to continue to leverage on the strong Perodua sales” in the second half of 2024 given the still-high order backlogs of over 100,000 units while new order intakes remain healthy, said Hong Leong Investment Bank, which has a ‘buy’ call on the stock.

MBM has a 20% stake in Perusahaan Otomobile Kedua Sdn Bhd that makes Perodua. The company also sells Daihatsu, Hino, Perodua, Volvo, and Volkswagen branded vehicles as well as manufactures automotive parts such as seat belts and airbags.

Shares of MBM have risen 38% so far this year though the majority of analysts are cautious over further upside in the stock amid broader concerns over demand for big-ticket purchases amid rising cost of living pressures.

A majority of six out of 11 research houses covering MBM have ‘hold’ calls on the stock and two have ‘sell’ ratings while only three recommend ‘buy’. The consensus 12-month target price is RM5.54, according to Bloomberg, about 6% below its last price.

“We remain cautiously optimistic on the local TIV (total industry volume) outlook”, and expect a stronger second-half of 2024 driven by seasonal factors, said Maybank Investment Bank. The research house has a ‘hold’ call on the stock, noting that Perodua is on track for another record year.

TIV is expected to fall to 765,000 units this year from the record-high 799,731 units in 2023, according to the Malaysian Automotive Association, which represents more than a dozen domestic and foreign brands, assemblers, distributors and retailers.

On Wednesday, MBM reported that its second quarter net profit climbed 30.26% to RM67.64 million, lifting the first-half total to RM147.89 million. The company also declared a first interim dividend of six sen per share, along with a special dividend of 10 sen per share.

“If there are no more special dividends forthcoming, we forecast the net cash position will grow bigger going forward,” said AmInvestment Bank. “The company is in a comfortable position to pay more dividends”, generating free cashflow of RM83 million in the first half of the year, it added.