Investment Highlights

• Maintain HOLD on MBM Resources (MBMR) with an unchanged fair value (FV) of RM5.47/share which is derived by pegging to FY25F PE of 8x – 1SD above its 3-year mean. Our neutral 3-star rating remains unchanged.

• A combined DPS of 16sen (6 sen interim and 10 sen special) was announced for 2Q24, bringing cumulative 1H24 DPS to 31sen (-6% YoY).

• 1H2024 core PATAMI of RM148 mil (+12% YoY) was within our expectation and consensus’. It is a clean set of results with no surprises.

• The Motor Trading and Assembly revenue grew by 10.2% YoY in 1H24. This was driven mainly by strong Perodua sales. PBT has grown by 10.7% YoY, roughly equal to revenue growth. Similarly, PBT margin was flattish YoY at 2.4%.

• Auto Parts Manufacturing saw a 4% YoY dip in revenue, but thanks to a better high value product mix and absence of lumpy cost incurred last year, PBT surged by 25% YoY. Hence, PBT margin has increased by 210 basis points to 9.1%.

• The outlook statement is optimistic citing positive TIV growth seen in 1H2024 and there remains a huge backlog order (+100k) for various Perodua models.

• Net cash has been reduced by 18.3% QoQ to RM176mil due to dividend payments in the period. If there are no more special dividends forthcoming, we forecast the net cash position will grow bigger going forward.

• MBMR generated FCF of RM83mil in 1H2024, which is a notable improvement against negative FCF of RM10mil for the same period last year. This means the company is in a comfortable position to pay more dividends.

• The stock currently trades at 8.3x FY25 PE multiple, which is close to its 3-year historical average of 8x. The dividend yield is 7.7%, inclusive of the special dividends.

• MBMR is trading close to its fair value and hence our neutral rating call. We will be back with a follow-up report post the analyst briefing.

Source: AmInvest Research - 29 Aug 2024