MBMR reported core PATMI RM78.5m for 4QFY21, which uplifted FY21 PATMI to RM136.8m (-17.2% YoY). We deem the results below HLIB’s expectation (88.5%), but slightly above consensus (106.4%). 4QFY21 earnings rebounded strongly as the economy reopened. We expect MBMR to continue leverage on the strong automotive sales in FY22, given the high backlogs and ongoing strong demand driven by the extended SST exemption measures until 30 Jun 2022. Maintain BUY on MBMR with unchanged TP: RM4.80 based on 10% discount to SOP of RM5.32. MBMR offers attractive dividend yield of 7.1%-8.1% for FY22-23.

Within expectation. Reported core PATMI of RM78.5m for 4QFY21, which uplifted PATMI to RM136.8m (-17.2% YoY) for FY21. We deem the result below HLIB’s forecast of RM154.5m (88.5%), but slightly above consensus of RM128.6m (106.4%) EIs for the year were mainly on RM33.6m (estimated) deferred tax credit on Perodua (22.6% effective stake) in 4QFY21.

Dividend. Declared 2nd interim dividend of 5 sen/share and a special dividend of 10 sen/share (both ex-date: 11 March). FY21 total dividend would be 20 sen/share (an attractive 6.5% yield).

QoQ. Returned to core PATMI of RM78.5m (from LATMI -RM5.4m), as overall group operations recovered during the quarter after government allowed the gradual re - opening of economy since Sep (Phase 1 NRP since Jun). Motor sales recovered substantially with accelerated deliveries during the quarter.

YoY. Core PATMI was flattish +0.3%, as the improved margins from automotive dealerships was offset by the lower contributions from automotive components and core associate/JV (after deducting estimated deferred tax credit for associate Perodua in 4QFY21).

YTD. Core PATMI declined by -17.2% to RM136.8m in FY21 mainly due to lower core contribution from associate Perodua (after deducting estimated deferred tax credit in 4QFY21) on lower car sales volume, affected by supply chain disruption and longer lockdown period during the year.

Outlook. Management remained cautiously optimistic on the group’s outlook in 2022. The optimism is backed by strong carried-over order bank and strong demand with the SST exemption extended until 30 Jun 2022. Perodua has set 2022 sales target of 247.8k units, as the group plans to increase production for the year to 265.9k units (provided no further supply disruption). Perodua is expected to launch new Alza replacement model and 2 updated models in 2022.

Forecast. Unchanged.

Maintain BUY, TP: RM4.80. Maintain BUY on MBMR with unchanged TP of RM4.80 based on 10% discount to SOP: RM5.32. MBMR is currently in a net cash position (60.7 sen/share) with continued earnings and cash flow growth, by leveraging onto the strong demand for Perodua models. MBMR offers attractive dividend yield of 7.1%- 8.1% for FY22-23.

Source: Hong Leong Investment Bank Research - 28 Feb 2022