Posted by commonsense > 2019-05-28 12:55 | Report Abuse

Hi Mike,

I still think MBMR at RM2.90 is a buy mainly due to the very undemanding valuation that it carries of around 6.5x 12 months trailing PE (this however still includes losses from the alloy wheel business). As mentioned in my earlier post, MBMR currently is the cheapest auto company in Bursa even though it has a direct exposure to Perodua which is the market leader. In most cases, this would actually command a premium over the industry average.

As a comparison:

1) UMW, which is the other listed company with exposure to Perodua via its 38% interest is currently trading at around 17x PE.
2) Pecca, a manufacturer of car leather seat of which Perodua contribute to the majority of the company's revenue and profit is currently trading at a PE of 12x.
3) The auto industry average in Bursa is currently trading at 15x trailling PE.

When UMW made the offer of RM2.56 to Med Bumikar to acquire their 50.1% interest in MBMR it was based on PE multiple of 10x of Perodua expected profit (UMW projected RM400mil for FY17 as the numbers was yet to finalized when the offer was made back in March 18. Perodua profit for that year was actually RM440mil. And in FY18 it jumped to RM668mil ) and a total value or RM100mil for the remaining business excluding Perodua. This brings the total offer value to around RM1bil or RM2.56 per share.

Now if you were to use this same valuation methodology based on FY18 results, it would mean that the value of MBMR would be at least :

1) MBMR portion in Perodua = PE multiples x Profit of Perodua x MBMR's shares in Perodua = 10 x RM 668mil x 22.6% = RM1.51bil or RM3.86 per share

2) plus the other business = RM100mil or RM0.26 sens

Total min value of MBMR is RM4.12 per share.

The other business outside of Perodua are actually profitable (except for the alloy wheel business which is expected to ceased operation by mid of this year). So valuing the other businesses at only RM100mil for me is really low.

As an example, please take note that MBMR is currently in the process of disposing 22% each of the company's interest in Hino Motors Sales and Hino Motors Manufacturing for a total consideration of RM74.4mil valuing the combined companies at RM74.4mil/ 22% = RM338mil . Upon completion, the company would still have a remaining 20% interest in both companies which means the remaining 20% interest in Hino alone is already valued at RM68mil.

Other business like the Daihatsu, Volvo and VW distributorships, Hirotako Holdings (which manufactures safety auto components) and 51% interest in Autolive Hirotako are all profitables businesses, If you take out the alloy wheel result in FY18, the remaining business excluding Perodua actually delivers a patami to shareholders of around RM35mil. Valuing it at only RM100mil would means that the PE for the other businesses is less than 3x.

So for me the lowest valuation that MBMR should get is 10x PE ( again this is still lower when compared to the industry average). And given that the alloy wheel business is expected to ceased operation in mid of this year, it is fair to put a zero value on the business.

So to answer your question on how much should MBMR should be valued, then my answer would be at least RM RM4.75 per share based on the method i mentioned above.

If for some reason, investors think that the PE should only be 8x, the TP would still be RM3.80. But again, i just don't see the rational for the market to value MBMR at half the industry average given that it actually has a very strong balance sheet and cash flow.

Every year, the NTA of the company is expected to increased by 50 sens per share (before div payment). As of March 19 the NTA is already RM4.14 per share. At the current price the PB is only 0.7x.

Regards.

Posted by commonsense > 2019-05-28 13:41 | Report Abuse

Hi Mike,

Here is my reply for your second portion of the question. Please don't get me wrong, I am not saying that the businesses that you mentioned in your post are bad investment (except maybe Zelan for the very risky outlook that it's facing at the moment). Just that when compared to other companies (like MBMR for example) the companies that you listed looks a lot more expensive (at least in PE and PB terms).

1) Zelan. As mentioned before, i still believe it to be a very risky investment. If you really are interested then maybe you should wait for the arbitrage decision which should be out by this week anyway. The issue is the equity to shareholders is already at 54% of the paid up capital. Based on the Annual report, any further losses amounting to RM20mil would reduce the equity to lower than the 25% paid up capital which could pose a risk of being a PN17 companies. I believe the 1Q19 result would deliver a loss of between RM5 to RM10 mil still. So if the Abu Dhabi court decide to reward Zelan anything that is lower than the RM184 mil of receivable amount due by Meena recorded in Zelan's book, then they will need to impair the receivables. If its more than RM20mil then there is a risk for Zelan to be listed as a PN17 company. Another way for Zelan to strengthen its balance sheet back is either by making a capital fund raising like Scomi and Perdana or by restructuring the debt (basically converting the debt amount to equity like KFM). That being said it is still bad for the shareholders.

2) Velesto: As mentioned before, i doubt that the company can make any significant profit in the near and mid term at least not until the charter rates improve significantly. Given the company's market cap of RM2.2bil for it to achieve a PE of 10x, it would need to deliver a profit of RM220mil per annum. The last time they managed to achieve profit of that magnitude was in FY14 just before the oil price tumble. The charter rate back then was double what they received at the moment.

3) Zhulian. An MLM company. Actually at the current price, the company is not that expensive. Only 11.4x trailing PE and 0.9x PB. Just that at the moment, i still have a lot of companies to study that is trading at below 8x PE and has potential growth in profit achievable in the next 12 months. Maybe when my list of companies are exhausted, i will take a look at Zhulian as an investment.

4) Inari. Again a good company. Might have some short term headwind at the moment given the increasing escalation of US China trade war. I am not interested mainly due to its valuation of 22x PE ( at the same valuation MBMR would be trading at RM10.52 per share) and 4.2x PB. At this rich valuation, they need to deliver a very strong profit growth to shareholders which might be hard at the moment.

5) AHB. I have to be honest, i never heard of the company before. In their website, they mentioned that they are an interior office designer business. I would assume that you can categorize them as a property industry correlated company. They are not actually a PN17 company. Market cap of RM26mil and profit of RM 1.6mil for the past 12 months bringing its valuation to 16x PE. PB is actually low at only 0.7x (similar to MBMR). That being said if you want exposure to property industry companies, there are a lot of candidates at the moment. My preference is Symphony Life which is currently developping the Star Residence near KLCC. The take up rate is high. Symlife has a valuation of only 4.5x PE and PB of 0.3x.

Best Regards.

Posted by Mike Chong > 2019-05-29 05:36 | Report Abuse

Commonsense, thanks for your reply. As it is just fundamental analysis and will affect by others factors , let’s share 4 of your pick stocks and see by year end how is the ROI . My pick are : 1) Zhulian ( rm1.38 ) 2) Inari ( rm 1.51 ) , 3) AHB ( Artwright , rm 0.145 ) , 4) Zelan ( rm 0.07 , although I bought much lower ) . By year end is just a period indicator as it can be sell at any time to lock in the profits and see the performance by year end .Hope you can share with us your 4 pick stocks.

Posted by commonsense > 2019-05-29 13:40 | Report Abuse

Hi mike,

I dont actually see the value in the exercise that u are proposing here. I think people already did a competition on that in i3 ( but most of the invitation are for promenant/ famous forumer). I did not get the invitation.

That being said, if u are looking for potential investment candidates for ur portfolio, i would suggest the following:

1) MBMR for the reasons mentionned earlier in my post. There is an update from this morning agm. Will share it if no one else have done yet later.

2) Lii Hen. Furniture stock that might proof to be a beneficiaries of the US China trade war as US furniture business will look to diversify their supply chain outside of china. As of 2018 China represent 65% (or around usd20 bil of us furniture import. Tariff on china furniture was raised to 25% from 10% earlier this month). 1q19 growth still have yet to show the potential affect of the US diversification. Most of the growth was mainly from usd appreciation. Expecting sales in usd term to start growing in 3q19. For 2q19 profit growth will still come from the strengthening of USD.
Current valuation is still cheap at only 8x pe.

3) Symlife. Property companies where the maiden profit will comes from the star residence project near KLCC. Take up rate is high. As mentioned b4, Pe is only 4.5x. Actually quit straight forward just like any other property stock. As long as the take up rate is high and projects can be deliver on time, company should be able to make money.

4) Muda Holdings. Industrial paper manufacturer. Expected increase of margin due to the fall of waste paper price which is the raw material for industrial paper. Since last year, China has been more strict in approving the type of wastepaper into the country which has resulted in the oversupply of wastpaper from Us and Europe. At the same time china had also imposed a 25% tariff on all wastepaper from US which is why wastepaper price has fallen substantially. The restrictions by China had also resulted in a lot of paper mill in china to stop or cut their production of industrial paper substantially. This increase the industrial paper price in China which resulted in other paper mills in Asia to sell their products in China instead of markets like malaysia. Given the lesser competition from overseas player, Muda will be able to sell more volume at a price that is good for the company. Current valuation is on 7x PE.

Actually mike, what is important besides the choice of the shares is maybe the reasoning. Some people might want to know why exactly you pick the stock. Maybe u can post it on the companies respective forum to share with others. Off course later there will also be some investors that would want to scrutinize on ur thesis. But isn't that whats this forum is for? I doubt u or me can affect too much on the share price of a company. Even if we promote a company like crazy, they will still fall if they fail to deliver on the result. The opposite is also true as well.

Best Regards. Good luck on ur investment.

Posted by commonsense > 2019-05-29 14:42 | Report Abuse

Hi Guys,

Just some updates on the AGM. It was quite fast and very straight forward. Only one shareholder who asked questions ( but really good ones). Here are the summary:

1) alloy wheel business has ceased operation since yesterday. So there should be no more losses from this division starting from at least 3Q19 onwards. Investors can expect to finally see profit coming from the auto component division which was before dragged by the alloy wheels result. Expect an increase of profit by between 10 -15% for 3Q19 from the closure of alloy wheel.

2) With the decreasing of debt and steady generation of cash from operation and investments amounting to Rm150mil per annum (mostly dividend from associates and JV), the company is expected to have a steady build up of cash reserves in the future ( on top of the current cash reserve of around rm200mil). For the mean time, management has indicated that potential dividend for FY19 would most probably be higher than the 12 sen dividend in FY18. Hopefully, given the stronger balance sheet, management can reward shareholders with dividend payment that is higher than the record 18 sens paid before.

3) a shareholder highlighted to management that they should revised the company's investment properties of value form cost basis to the current market value. In the annual report (page 116) the investment properties has a value of RM59mil which is the cost paid by the company. The actual market value of the investment properties (which is actually indicated in the notes on the same page) is RM 137 mil or rm78mil more than in the balance sheet. This would mean the actual NTA for MBMR is not RM4.14 per share (as of mar 19) . The amount should be higher to reflect the true value of the investment properties. Real NTA is RM4.34 per share.

Anyway, seems like 2019 wilk be another good year for MBMR.

Best regards.

Posted by yongch > 2019-05-29 15:53 | Report Abuse

Today free 20kfc voucher,rm7parking,free coffee or tea plus previous dividend...ok la!!!!rushing attended another 10 more AGM...really time is money!!!

Posted by Op3rs > 2019-05-29 17:13 | Report Abuse

thx common sense :)

Posted by Mike Chong > 2019-06-03 08:34 | Report Abuse

Proton suv hit purchases 30000 unit . April sales lower , May sales ?

Posted by Mike Chong > 2019-06-03 17:23 | Report Abuse

Aruz order book is 25000 unit.

Posted by Sebastian Sted Power > 2019-06-04 01:25 | Report Abuse

https://www.youtube.com/watch?v=TBvwnzDI5zQ

watch from 1:58 onwards

Posted by Mike Chong > 2019-06-07 14:09 | Report Abuse

New Persona with AI...??

Posted by GLNT > 2019-06-11 15:14 | Report Abuse

EPF please continue to sell more! Thanks!

Posted by Sebastian Sted Power > 2019-06-11 15:59 | Report Abuse

sold half of my holding change to Proton X70. Fair fair because my house got one Aruz, another one X70. Share holding also need 50-50

Posted by Mike Chong > 2019-06-12 08:43 | Report Abuse

X70 will bring u X50....

Posted by Mike Chong > 2019-06-13 09:49 | Report Abuse

What happen drbhcom and bauto up ....

Posted by OhYES > 2019-06-13 11:07 | Report Abuse

bauto achieve higher profit and declare 10.5 sen huge dividends.

Posted by Sebastian Sted Power > 2019-06-13 17:00 | Report Abuse

MBMR better 6cents div, but today ex-DIV still stable. Mean 6cents free in pocket

Posted by Mike Chong > 2019-06-17 10:31 |

Post removed.Why?

Posted by Hafid > 2019-06-19 16:49 | Report Abuse

Hino Motors has been in Malaysia for 40 years and is Japan’s oldest motor vehicle manufacturer, with its trucks and buses marketed in over 70 countries worldwide.

So how is Hino maneuvering the rapid changes in the transportation sector?

We speak to Hino Malaysia's newly minted Managing Director Atsushi Uchiyama, on the companies longstanding presence in Malaysia as well as its future plans for growth.

Posted by Mike Chong > 2019-06-23 11:31 |

Post removed.Why?

Posted by Mike_chong > 2019-06-28 06:12 |

Post removed.Why?

Posted by Mike_chong > 2019-06-28 12:55 |

Post removed.Why?

Posted by Mike Chong > 2019-06-29 14:02 | Report Abuse

Same like con man in netx....

Posted by Mike Chong > 2019-07-01 09:11 | Report Abuse

Black face and white face again.....

Posted by Sebastian Sted Power > 2019-07-03 09:09 | Report Abuse

11 June I have sold half of my mbmr holding to drb. Surprisinglyfrom less than a month already gain 10% while mbmr price still no movement at 2.90 like that

Posted by Mike Chong > 2019-07-03 09:50 |

Post removed.Why?

Posted by Mike Chong > 2019-07-03 11:45 | Report Abuse

Sebastian, congrate to u , drb now up 7 cent , seems will bring u x50...

Posted by Sebastian Sted Power > 2019-07-04 08:20 | Report Abuse

most funny is both entry price for mbmr and drb is same at 2.15

Posted by Icon8888 > 2019-07-04 08:25 | Report Abuse

I dumb dumb hold

Dumb people like me only knows dumb dumb hold

Not like mike Chong so clever

Posted by anticon > 2019-07-04 08:34 | Report Abuse

Posted by Icon8888 > Jul 4, 2019 8:25 AM | Report Abuse

I dumb dumb hold

Dumb people like me only knows dumb dumb hold

Not like mike Chong so clever



You scumbag conman Icon8888 say you dumb dumb hold, my foot, even for half a cent gain you will sell and cabut. Friends, don't believe this conman & scumbag Icon888 as I caught him a number of times curi curi sell at half a cent again when all the time he con members saying that it will rise by how much. This conman Icon8888 is a real scumbag indeed. Never trust him as alot of members already scold him for cheating them. BTW, this conman scumbag Icon888 uses more than 20 alias or false accounts here, just beware of him as a reminder.

Posted by Mike Chong > 2019-07-04 09:53 | Report Abuse

Wah Sebastian, you r better than commonsense lo, I think he is shy away from u . When u bought mbmr?

Posted by Mike Chong > 2019-07-04 11:02 | Report Abuse

Sebastian, the most funny is your comment on 5/3/19, entry price at 2.60:

Sebastian Sted Power RM2.60 here I come. I'm perodua lover
05/03/2019 4:47 PM

Ha ha , all these are commonsense black and white face with so many alias name to remove others info comments.sebastian , icon8888, hafid???

Posted by Mike Chong > 2019-07-04 12:24 | Report Abuse

Very funny lo... got buy or not ....not to con traders....

Posted by Sebastian Sted Power > 2019-07-04 15:44 | Report Abuse

Walao! You like me say me. march 2019 is second time. Early early bought before that dontmakesense

You can go check at other forum I also condemn that dontmakesense go here and there promote

Posted by Sebastian Sted Power > 2019-07-04 15:48 | Report Abuse

If I liar then quick quick hide under blanket liao. Dont come blow with you

Posted by Sebastian Sted Power > 2019-07-04 15:50 | Report Abuse

Are you sure we are referring to the real ICON8888? I found the is 1CON8888, iCON8888, IC0N8888

Posted by Sebastian Sted Power > 2019-07-04 16:56 | Report Abuse

Dear Mr XXX,

This is to inform you of your cash dividend entitlement with details as follows:

Account No. 1001XXXX
Stock Name MBM RESOURCES
Cash Dividend (RM) XXXXX
Please note that the above dividend will be credited to the cash position of your account by the end of the day.

Should you require further assistance, please call our Customer Service Representatives during office hours or email us at customerservice@rakutentrade.my.

Posted by Richard Lee > 2019-07-04 19:56 | Report Abuse

TOP 4 in this forum:

1- mike chong
2- icon
3- common
4- Sebastian

sound like all of you are major shareholder

Posted by Mike Chong > 2019-07-04 21:06 | Report Abuse

Wah Sebastian your old friend Ruchard Lee follow you, can ask what share he bought?? I scare he P.E.C.C.i.b.a.i again.....

Posted by Mike Chong > 2019-07-04 21:15 | Report Abuse

Sebastian, pls ask nicely as Ruchard Lee only major shareholder will comments, don’t waste his precious time......

Posted by Sebastian Sted Power > 2019-07-05 02:19 | Report Abuse

maybe I shall follow you all in NETX. Easily can double triple profits

Posted by James Ng > 2019-07-06 10:12 | Report Abuse

https://klse.i3investor.com/blogs/general/213922.jsp
[转贴] [MBM RESOURCES BHD：更高的表现得益于对Perodua车辆的良好需求，特别是对Myvi和Axia车型的需求，以及自2018年11月推出以来引起了人们浓厚兴趣的Perodua Aruz的补充] - James的股票投资James Share Investing

Posted by Richard Lee > 2019-07-08 08:02 | Report Abuse

Muke, you talk so much got earn a single cent?

Posted by Mike Chong > 2019-07-08 08:44 | Report Abuse

Ruchard 你,why u envy meh? Cool down if make loss.....

Posted by RogerTan901111 > 2019-07-12 08:30 | Report Abuse

https://www.thestar.com.my/business/business-news/2019/07/12/revamp-in---mbm-resources-board-of-directors/

Posted by Mike Chong > 2019-07-12 11:17 | Report Abuse

Meaning major shareholder won, commonsense any comments?

Posted by Mike_chong > 2019-07-12 17:23 | Report Abuse

Ha ha major shareholder want cash ....Cash is King....

Posted by Richard Lee > 2019-07-13 17:31 | Report Abuse

Commonsense (a.k.a Aminar Rashid Salleh) is major shareholder kot. Hahaha!! Weird that Common very diam now

Posted by megatti_maf > 2019-07-15 19:13 | Report Abuse

Common might be the EPF fund manager who is on Switzerland holiday now. Bilis dont be hatin

Posted by Sebastian Sted Power > 2019-07-17 15:21 | Report Abuse

Common takut Mike liao. Hide so long

Anyway, let read what CEO talk today on half year performance. Its look good

https://www.thestar.com.my/business/business-news/2019/07/17/perodua-revises-upwards-sales-target-to-235000-units/