Review

• MBM Resources Bhd (MBM)'s performance in 1QFY24 exceeded expectations, primarily driven by a higher-than-anticipated contributions from the Motor Trading Division. Excluding non-core items, the core net profit for 1QFY24 increased marginally by 0.6% YoY to RM0.6mn, supported by an 11.0% rise in revenue.

• Motor Trading Division – 1QFY24 revenue rose by 13.5% YoY to RM541.2mn, driven by a significant increase in Perodua sales volume (+37.6% YoY). However, despite the growth, PBT only saw a modest 0.5% YoY increase to RM80.4mn, largely attributed to decrease in margins. Excluding the contribution from the associated entity, the adjusted PBT would have been increased by 10.4% to RM13.2mn.

• Auto Parts Division – Despite lower revenue, 1QFY24 PBT increased by 9.5% to RM16.3mn, mainly due to higher contribution from associates and JVs.

• No dividend was declared for the quarter under review.

Impact

• We have revised our earnings forecasts for FY24 and FY25 upwards by 11.4% and 6.1%, respectively, after factoring in higher contribution from the Motor Trading Division. Additionally, we have introduced our FY26 earnings forecast of RM254.9mn (-2.9% YoY).

Outlook

• Management remains cautiously optimistic about the outlook, considering the risks of global macroeconomic headwinds and potential fuel subsidy rationalisation. Meanwhile, Volvo and Volkswagen have experienced lower sales volumes since last year.

• Forward sales orders are indicating a trend of easing. We have observed a reduction in the current outstanding bookings for Perodua, decreasing from 128k units in the previous quarter to 100k units. This could potentially lead to weaker sales in 2024, despite the introduction of new models, facelift versions, and new variants.

• Meanwhile, MBM disclosed its entry into a new dealership agreement with Jaecoo, a rapidly expanding brand of premium SUVs from China. It plans to open its first 1S outlet in June at Menara MBMR, followed by a 4S outlet in Segambut next year. No sales target has been provided at this juncture.

Valuation

• Maintain SELL on MBMR with a higher TP of RM4.70/share, after rolling over the valuation base year to CY25 with a PER multiple of 7x.

Source: TA Research - 28 May 2024