Review

• MBM Resources Bhd (MBM)’s 3QFY23 came in above expectations. The variation was mainly due to higher contributions from associates. Excluding non-core items, 3QFY23 core net profit increased 25.3% YoY to RM75.5mn despite flattish revenue.

• Cumulatively, 9MFY23 core net profit increased by 24.4% to RM207.2mn. This accounting for 85% and 81% of ours and consensus’ full year estimates.

• Motor Trading Division – 9MFY23 revenue increased by 4.3% YoY to RM1.5bn on the back of higher Perodua sales volume (+18.8% YoY). PBT increased 13.3% YoY to RM214.9mn. If we exclude the associate contribution from Perodua, the adjusted PBT would have reduced by 17.3%, mainly due to the lower sales volumes in Volvo (-6.0%) and Volkswagen (-35.6% YoY) and higher discounting post sales tax exemption since 31 Mar 2023.

• Auto Parts Division – 9MFY23 revenue dropped slightly by 0.9% YoY to RM229.9mn while PBT decreased by 40.7% to RM38.5mn. Excluding all the one-off disposal gains, the adjusted PBT would have decreased by 55.8%.

• The group declared a 2nd interim dividend of 6.0 sen/share and a special single tier dividend of 7.0 sen/share for the quarter under review.

Impact

• We revise upward our earnings forecasts for FY23 – FY25 by 0.4% - 7.6% after factoring in higher associates and JVs contributions.

Outlook

• Despite the positive car sales momentum in 4Q, we observe forward sales orders are showing signs of easing. This could translate to weaker sales in 2024 despite launches of new models, facelift versions, and new variants.

• Meanwhile, with the expiry of sales tax exemption, we expect stiff competition and carmakers may need to offer discounts to entice budgetconscious customers. The targeted fuel subsidy scheme may also affect the vehicle demand next year, in our view.

Valuation

• Maintained SELL on MBMR with a TP of RM4.13/share, based on CY24 PER of 7x. YTD, MBM share price has appreciated by around 30%, and we didn’t see any strong catalyst that can drive the share price higher in the near-term.

Source: TA Research - 27 Nov 2023