MBM Resources’ outlook remains cautiously optimistic


MBM Resources Bhd’s business fundamentals remain strong despite the ongoing Movement Control Order (MCO) 3.0 which is expected to affect near-term footfalls into its showrooms.

RHB Investment Bank Bhd (RHB Research) analyst Eddy Do Wey Qing expects MBM’s sales will continue due to the backlog of orders, recent new model launches and replacement cycle.

“Perodua (Perusahaan Otomobil Kedua Sdn Bhd) recorded an April sales volume of 20,399 units, down 17%, bringing year-to-date (YTD) volumes to 78,304 units. April’s numbers were adversely impacted by shortages of semiconductor chips.

“We think the chip shortages are concentrated on the Myvi rather than across the board. Hence, we take the view that a rationing in vehicle production is being exercised, which limits a knee-jerk-type sales volume drop in the coming months,” he wrote in a research note yesterday.

YTD vehicles sales of 78,304 units at the end of April are at 33% of the research house’s 235,000 units annual sales forecast and are slightly below expectation. RHB Research expects consumers to bring on their purchases, leading to a stronger first half in 2021 (1H21).

“Excluding this, we maintain our sales volume at this time as we believe buying interest should continue to sustain throughout the financial year 2021 (FY21),” said Do.

Perodua maintains its annual sales targets of 240,000 units, an increase of 9% year-on-year (YoY), and 272,000 units (+23% YoY) in terms of sales and production.

Perodua still reigns supreme in the SUV segment with around 4,624 Ativa units sold in April, which makes up 22% of Perodua’s total vehicles sold for this period.

Do noted that the Ativa continues to outsell Proton X50, which recorded 3,583 units sold in April.

“We understand that nearly 9,000 Ativas have been delivered since its launch in March, with bookings averaging at 290 units per day,” he said.

RHB Research updated its forecast on MBM by lowering its FY21F-FY23F earnings by 2% to 3% after accounting for a stronger US dollar/ringgit of 4.15 for FY21 and 4.25 for FY22 and beyond, from 4.12 previously.

It understands the impact is generally not significant and can be recovered through foreign-exchange (forex) price negotiations with customers and made no other changes to its key assumptions.

“We roll forward our valuation base year to FY22F and, subsequently, lower our target price-earnings (PE) to eight times from 9.5 times, as we think near-term catalysts are priced in following the launch of the Ativa,” it stated.

RHB Research is of the view that weaker than expected consumer sentiment, rising number of Covid-19 cases and unfavourable forex trends should pose downside risks to MBM Resources’ earnings.

The research house kept its ‘Buy’ call on MBM but lowered its target price on the carmaker to RM3.80 from RM4.30 previously.