MBMR reported core PATMI at RM148.1m for FY21, after recording a strong 4QFY21 RM89.8m, driven by accelerated deliveries on strong demand and production recovery prior to year-end. Management is cautiously optimistic on 2022 outlook, as the economy has now fully opened while demand remains strong with challenges of increasing raw material costs and logistic expenses. Management indicated another final dividend payout for FY21, potentially bumping up total dividend to 25-28 sen/share (7.7-8.6% yield) in FY21. Maintain BUY on MBMR with unchanged TP: RM4.80 based on 10% discount to SOP of RM5.32. MBMR offers attractive dividend yield of 6.8%-7.7% for FY22-23.

FY21 results within expectation. Following management clarification on Perodua’s Investment Tax Incentive of RM90m (lower than our expectation of RM140m) in 4QFY21, we have adjusted MBMR FY21 core PATMI to RM148.1m (from RM136.8m), meeting HLIB’s expectation of RM154.5m (96%), but above consensus’ RM128.6m (115%). The group has leveraged onto the strong automotive market recovery as the economy reopened since mid-Aug and OEMs accelerated productions and deliveries prior to year-end.

FY22 outlook. Management is cautiously optimistic of a better FY22, as the economy is now fully opened and recovery momentum is on track. New orders are still coming-in strongly, as consumers take advantage of the lower car prices during the SST exemption period (now extended to Jun 2022). OEM’s productions are expected to improve with less intermittent disruption from Covid-19 pandemic while the global chips supply situation improves. Nevertheless, the industry may be challenged by the increasing material costs and logistics expenses.

Perodua. Associate Perodua has set a record high sales target of 247.8k units (+30.2% YoY) and production target of 265.9k units (+20.3% YoY) for 2022. The indicative order backlog was 4-5 months, satisfying deliveries up to July 2022, while on-going new orders are still encouraging. Management has guided for the Alza replacement model and another two updated models to be launched in 2022 to keep the market excited.

Disposal of OMI Alloy. With the re-opening of national borders, interest by potential foreign parties have again picked up. The current net book value of the asset is RM30.6m. Previously, management explored the idea of a potential special dividend from the disposal proceeds, subject to shareholder approval.

Dividend. Management highlighted of another final dividend payout, which we estimate a range of 5-8 sen/share. Hence, the potential total dividend for FY21 would be a record high of 25-28 sen/share (inclusive of a special dividend of 10 sen/share), indicating potential dividend yield of 7.7-8.6%. The net cash position of MBMR group remains healthy at 60.7 sen/share.

Forecast. Unchanged.

Maintain BUY, TP: RM4.80. Maintain BUY on MBMR with unchanged TP: 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 6.8%- 7.7% for FY22-23.

Source: Hong Leong Investment Bank Research - 2 Mar 2022