Results

• Within Expectations – Reported core PATAMI of RM21.2m for 4Q15 and RM84.2m for FY15 (excluding property segment contribution of estimated RM10.0m and provisions of RM13.8m), which is 103.6% of HLIB’s expectation and 92.0% of consensus.

Deviations

• None.

Dividends

• Declared net dividend of 3.0sen. Total net dividend of 10.0sen for FY15 or 4.1% dividend yield.

Highlights

• Excluding RM139.8m revenue from property sales, FY15 revenue dropped by 7.4% yoy to RM1.64bn on the back of lower sales volume of FAHB (Volvo, Mitsubishi and VW) and DMSB (Daihatsu & Hino).

• Overall core EBIT (excluding RM13.8m provisions on receivable and inventory) improved to RM1.6m in FY15 (vs. RM2.0 losses in FY14) on better sales mix and lower sales and distributional costs (less aggressive sales campaigns).

• Automotive components remained loss making in FY15 despite higher volumes, as OMI Alloy Wheel incurred higher operational costs (related to capacity expansion and higher input cost on weakened RM). OMI Alloy Wheel is expected to breakeven in 2016.

• Contribution from associate Perodua and Hino dropped to RM100.3m in FY15 (vs. RM125.3m in FY14) on weakened RM (higher input cost for Perodua) and lower sales volume of Hino (-15.8% yoy).

• JV contribution from Autoliv dropped significantly to RM15.6m in FY15 (vs. RM23.1m in FY14) on the back of lower production deliveries (lower demand from Proton) and weakened RM against US$.

• Outlook for FY16 hinges on the expected higher sales volume of Perodua and Proton with the expected 6 new model launches during the year.

Risks

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

Forecasts

• Unchanged pending analyst briefing later today.

Rating

BUY

Positives

• Relatively low valuations.
• Strong sales of Perodua.
• Turnaround of OMI Alloy wheel plant.

Negatives

• Absence of strong foreign automotive partner as compared to UMW (with Toyota) and TCM (with Nissan).
• Small cap and low liquidity.
• Weakened RM.

Valuation

• Maintain BUY recommendation on MBM with unchanged TP of RM3.00 based on FD SOP.

Source: Hong Leong Investment Bank Research - 25 Feb 2016