MBM Resources climbs to record high on strong earnings, dividend and solid outlook

KUALA LUMPUR (Nov 27): Analysts expect MBM Resources Bhd (MBMR) to continue leveraging the strong Perodua sales into the financial year ending Dec 31, 2024 (FY2024), given the high order backlog.

The stock climbed to an all-time high of RM4.44 in early trade on Monday, after its net profit jumped 72% for the third quarter ended Sept 30, 2023, boosted by a gain of RM28.4 million arising from disposal of a piece of vacant land in Bandar Sri Sendayan, Negeri Sembilan.

The group declared a special dividend of seven sen, and an interim dividend of six sen, bringing the total payout per share to 13 sen, with Dec 8 set as the ex-date.

In separate notes, Hong Leong Investment Bank (HLIB) Research and Kenanga Research said MBMR’s results beat consensus expectations.

HLIB deemed the results for the cumulative first nine months ended Sept 30, 2023 (9MFY2023) to be above the house’s full-year forecast at 83.5%, and the consensus at 82.6%, driven mainly by strong order books for Perodua models, and accelerated production and delivery schedules.

“Exceptional item gains of RM25.5 million were excluded in 9MFY2023, mainly attributed to a RM25.6 million gain on disposal of the asset held for sale (a piece of freehold land in Bandar Sri Sendayan), partially offset by allowances for slow moving inventory and expected credit loss,” it said.

The research house said MBMR will leverage Perodua’s strong order backlog of over 150,000 units and continued strong new orders into 2024.

It said Perodua had revised up its 2023 sales target to 325,000 units (from 314,000 units), backed by a production target of 338,000 units (from 330,000 units).

“Perodua is also expected to launch another two facelift models in the coming months. However, other dealerships have seen a demand slowdown (for Volvo and Volkswagen), resulting in higher discounting promotions.

“The group will continue to manage its cost through process improvement and its cost rationalisation exercise to remain competitive,” it said.

HLIB raised its earnings forecasts for MBMR by 15.8% for FY2023, 13.5% for FY2024, and 12.9% for FY2025.

The research house maintained its “buy” rating, and raised its target price (TP) to RM5.40 (from RM4.80).

Meanwhile, Kenanga said MBMR’s 9MFY2023 results met its expectations at 78% of its full-year forecast, but beat market expectations at 81% of the full-year consensus estimate.

The research house maintained its TP of RM4.85 based on a price-earnings ratio (PER) of seven times on earnings per share forecast for FY2024, which is at a discount to the auto sector’s average forward PER of 11 times, given its smaller scale and business model which is skewed towards auto dealerships as compared to other players, which are more into auto manufacturing.

Kenanga, which has an “outperform” rating for MBMR, said it continues to like MBMR for: i) its strong earnings visibility, backed by an order backlog of Perodua vehicles of 155,000 units (almost half of its 2023 target sales of 325,000 units); ii) being a good proxy to the mass-market Perodua brand, given that it is the largest dealer of Perodua vehicles in Malaysia, as well as its 23% stake in Perusahaan Otomobil Kedua Sdn Bhd, the producer of Perodua vehicles; and iii) its attractive dividend yield of about 11%.

MBM Resources declares 13 sen dividend as disposal gain boosts 3Q earnings by 72%