Stock Name: MBMR
Company Name: MBM RESOURCES BHD
Research House: OSK
MBM Resources Bhd
(May 25, RM2.71)
Maintain buy at RM2.70 with a higher target price of RM4.06: MBM reported a 1QFY10 revenue and net profit of RM363.8 million and RM39.9 million respectively. Its annualised revenue and profit before associates were in line within our forecast but on a net basis, the net profit swelled way above our estimate by 68% due to significantly higher contributions from associates Perodua and Hino, thanks to the favourable movements of the ringgit against the Japanese yen, and improved efficiency as overall sales improved.
At the subsidiary level, MBM's 1QFY10 revenue surged 48% year-on-year (y-o-y) and 12% quarter-on-quarter (q-o-q), driven by higher unit sales from its Perodua dealership (unit sales up by 16.4% q-o-q, 44.5% y-o-y), along with higher sales of foreign marques from Federal Auto (unit sales soared 55% q-o-q, 207% y-o-y).
On the manufacturing side, strong vehicle sales also pushed up sales of steel wheels, rims and tyre assembly. This in turn boosted the revenue contribution from its subsidiary; Oriental Metal Industries, by 15.4% q-o-q and 35% y-o-y. Collectively as a manufacturing division however, MBM did not achieve a higher revenue base compared to the preceding quarter due to the recent disposal of one of its key subsidiaries, WSC.
MBM's profit before associate and tax grew by 63% q-o-q and threefold y-o-y as margins normalised, attributed to improving sales productivity from its dealership networks and better operating efficiencies from its manufacturing division.
With the results exceeding our estimates by 68% on an annualised basis on strong associate contributions from Perodua and Hino, we are upgrading our associate earnings by 47% for FY10 and 42% and 26% respectively for FY11 and FY12.
Consequently, this raises our earnings estimates for FY10, FY11 and FY12 by 29%, 27% and 18% respectively. Pegged at a lower PE (price-to-earnings) multiple of eight times (previously nine times) due to its tight liquidity, we derive a new target price of RM4.06 (from RM3.54 previously), with our buy call retained, which gives a potential upside of 50% and a dividend yield of 6.7%. ' OSK Research, May 25
This article appeared in The Edge Financial Daily, May 26, 2010.
Company Name: MBM RESOURCES BHD
Research House: OSK
MBM Resources Bhd
(May 25, RM2.71)
Maintain buy at RM2.70 with a higher target price of RM4.06: MBM reported a 1QFY10 revenue and net profit of RM363.8 million and RM39.9 million respectively. Its annualised revenue and profit before associates were in line within our forecast but on a net basis, the net profit swelled way above our estimate by 68% due to significantly higher contributions from associates Perodua and Hino, thanks to the favourable movements of the ringgit against the Japanese yen, and improved efficiency as overall sales improved.
At the subsidiary level, MBM's 1QFY10 revenue surged 48% year-on-year (y-o-y) and 12% quarter-on-quarter (q-o-q), driven by higher unit sales from its Perodua dealership (unit sales up by 16.4% q-o-q, 44.5% y-o-y), along with higher sales of foreign marques from Federal Auto (unit sales soared 55% q-o-q, 207% y-o-y).
On the manufacturing side, strong vehicle sales also pushed up sales of steel wheels, rims and tyre assembly. This in turn boosted the revenue contribution from its subsidiary; Oriental Metal Industries, by 15.4% q-o-q and 35% y-o-y. Collectively as a manufacturing division however, MBM did not achieve a higher revenue base compared to the preceding quarter due to the recent disposal of one of its key subsidiaries, WSC.
MBM's profit before associate and tax grew by 63% q-o-q and threefold y-o-y as margins normalised, attributed to improving sales productivity from its dealership networks and better operating efficiencies from its manufacturing division.
With the results exceeding our estimates by 68% on an annualised basis on strong associate contributions from Perodua and Hino, we are upgrading our associate earnings by 47% for FY10 and 42% and 26% respectively for FY11 and FY12.
Consequently, this raises our earnings estimates for FY10, FY11 and FY12 by 29%, 27% and 18% respectively. Pegged at a lower PE (price-to-earnings) multiple of eight times (previously nine times) due to its tight liquidity, we derive a new target price of RM4.06 (from RM3.54 previously), with our buy call retained, which gives a potential upside of 50% and a dividend yield of 6.7%. ' OSK Research, May 25
This article appeared in The Edge Financial Daily, May 26, 2010.
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