Investment Highlights
- We reiterate our BUY call on MBMR with a slightly higher fair value of RM5.10/share (from RM5.00/share previously) by pegging to a FY22F target PE of 8.5x – 2.0 standard deviation above its 5-year average of 7x on robust prospects. We make no changes to the neutral ESG rating of 3 stars.
- MBMR’s 9MFY22 core net profit (CNP) of RM172mil came in above expectations at 79% of our FY22F net profit and 80% of street’s. In comparison, 9M accounted for 55%- 79% of full-year CNP before the pandemic periods (FY18-FY19).
- As such, we raise our earnings by 7% for FY22F, 9% for FY23F and 14% for FY24F on higher Perodua sales assumptions.
- YoY, the group’s 9MFY22 revenue rocketed 71% to RM1,657mil as motor trading operation rose 70% to RM1,423mil and auto parts manufacturing increased 78% to RM232mil. Accordingly, 9MFY22 CNP went up 2.9x YoY, partly supported by a reduction of 24% YoY in operating costs.
- 3QFY22 topline surged 2.7x YoY due to tremendous performance in motor trading (+2.6x) at RM529mil and auto parts manufacturing (+3.2x) at RM92mil from a low base effect last year affected by lockdowns. Consequently, 3QFY22 CNP swung around to RM60mil from a loss of RM5mil in 3QFY21.
- During the quarter under review, the vast improvement in associates/JV (+8.8x YoY) to a combined RM52mil alongside improved aftersales service margins also contributed to the CNP turnaround.
- QoQ, MBMR posted an increment of 12% in 3QFY22 topline mainly supported by auto parts manufacturing business (+29%), boosted by increased supply from Perodua.
- However, lower results from a slight shortfall from motor trading (-3%) and reduced share of associates (-41%) caused 3QFY22 bottomline to rise only marginally by 4%. Motor trading contribution retracted sequentially due to lower stock supply from Volvo.
- We are positive on MBMR’s near-to-medium term outlook due to: 1) robust sales from Perodua; and 2) upcoming model roll-outs.
- The company is currently trading at an undemanding valuation of 6x FY22F PE, one notch lower than its 5-year average of 7x.
Source: AmInvest Research - 25 Nov 2022
