Results

• Within Expectations – Reported 4Q14 core earnings of RM33.5m and FY14 of RM113.8m, in-line with HLIB’s forecast (103.7%) and consensus (96.7%).

Deviations

• None.

Dividends

• Declared second single tier interim dividend of 4sen/share. Total dividend of 8sen/share in 2014, in line with our expectation.

Highlights

• MBMR has reclassify 51% owned Autoliv Hirotako (AHSB) into Jointly Controlled Entity (from Subsidiary) effective in 4Q14, which has deconsolidate AHSB accounts from MBMR account. However, there is no impact to MBMR’s bottomline, as earnings from AHSB will still be recognized under JCE/Associate contribution. Despite that, we are still using consolidated numbers for comparison purposes.

• FY14 revenue dropped 9.7% yoy on lower sales of Automotive segment – DMSB (Dealership for Hino and Daihatsu) and DMMS (Dealership for Perodua); and Component Segment – Hirotako (Safety and Acoustic).

• Overall margins also dropped in FY14, being dragged by higher start-up cost for OMI Alloy wheel, lower sales of Hirotako as well as initial losses from property development.

• FY14 also sees lower contribution from associate Perodua and Hino by 8.8% on lower sales volume and start-up of new Perodua and Hino manufacturing plants. However, we note that associate contribution increased substantially by over 30% qoq and yoy in 4Q14, indicating strong contribution from Perodua Axia.

Risks

• Prolonged tightening of banks’ HP rules.
• Slowdown in the Malaysian economy affecting car sales.
• Global automotive supply chain disruption.

Forecasts

• Maintained our forecast at this juncture pending analyst briefing.

Rating

BUY

Positives

• Cheap valuations.
• Strong sales of Perodua.
• Turnaround of OMI Alloy wheel plant.
• Weakening Yen against RM.

Negatives

• Does not have strong foreign automotive partners as compared to UMW (with Toyota) and TCM (with Nissan).
• Small cap and low liquidity.

Valuation

• We remained positive on MBMR outlook for 2015, leveraging on the sustainable growth of Perodua and lower losses from OMI Alloy wheel plant as new orders kick in from Perodua and other local OEMs. Maintained BUY on MBM with unchanged TP of RM4.00 based on SOP.

Source: Hong Leong Investment Bank Research - 2 Mar 2015