FY21 core PATAMI of RM167.9m (+6%) came in above our/consensus expectation at 123%/131% of estimates on stronger-than-expected 4QFY21 performance. The group is cautiously optimistic on CY22 prospects with the continued strong demand for vehicles supported by favourable interest rates, continuation of sales tax exemption until 30 June 2022, and introduction of new models including electric vehicles (EV) at more competitive prices. Maintain OUTPERFORM and TP of RM3.50. The stock offers dividend yield of 6.5%.

FY21 above expectations. FY21 core PATAMI of RM167.9m (+6%) came in above our/consensus expectation at 123%/131% of estimates on stronger-than-expected 4QFY21 performance. A 2nd Interim DPS of 5.0 sen, and special DPS of 10.0 sen was declared for the quarter, bringing FY21 DPS to 20.0 sen. (FY20: 20.0 sen), above expectation.

YoY, FY21 core PATAMI rose 6% on stronger 4QFY21 performance which strongly recovered from 3QFY21 lockdown quarter, which affected its overall sales then (-15%). The demand for Perodua, Volvo and Volkswagen vehicles, as well as the commercial vehicles Daihatsu Granmax and Hino remained strong although the sales volume is still affected by some stock supply shortages. Attractive year-end promotional campaign from the principals helped to boost the volume as well. Its associates’ contribution recovered strongly (+3%) with the strong volume in 4QFY21 year-end sales. Perodua ended the year with volume plunging to 190,291 units (-14%), mostly hit by MCO-led road- block in 3QFY21.

QoQ, 4QFY21 soared strongly into the black with core PATAMI of RM109.5m compared to core losses of RM5.4m in 3QFY21 in concurrent with higher sales (+144%), which strongly recovered from 3QFY21 lockdown quarter, and further boosted year-end promotional sales. Perodua recorded volume of 71,198 units (+227%) drove stronger on delivery of the face-lifted MyVi which was launched on 18th November 2021 with overall sales driven by the all-new Axia, Myvi, Bezza, and ARUZ and Ativa.

Outlook. MBMR’s business strategy lies in its: (i) deep value stake in 22.58%-owned Perodua, and (ii) dual-income streams as the largest Perodua dealer and as parts supplier for most of the popular marques. Perodua’s market share is supported by higher delivery of all-new Myvi, all-new Perodua ARUZ, and the all-new ATIVA which provide better margins compared to the previous models. The group is cautiously optimistic on CY22 prospects with the continued strong demand for vehicles supported by favourable interest rates, continuation of sales tax exemption until 30 June 2022, and introduction of new models including electric vehicles (EV) at more competitive prices.

Maintain OUTPERFORM and Target Price of RM3.50 based on 7x FY22E EPS (at -1.0 SD of 5-year forward historical mean PER). The stock offers dividend yield of 6.5%.

Risks to our call include: (i) lower-than-expected car sales volume, and (ii) lower-than-expected associates’ contribution.

Source: Kenanga Research - 28 Feb 2022