MBM’s decent
results were in line with our estimates but beat consensus’ as margins widened, boosted by
airbag maker Hirotako, which achieved economies of scale following new safety
rules requiring all national cars to be fitted with at least 2 frontal airbags.
We expect the ensuing quarters to be stronger driven by: i) improved sales of
Perodua, and ii) higher sales from Volkswagen after the launch of the new Polo
sedan. We maintain our BUY call and earnings estimates but cut our SOP fair
value to RM4.58 from RM5.34 to reflect risk of weaker Perodua sales. With a 62%
upside, our FV implies a PE of 9x vs the sector average of 10x.
Results In line.
MBM posted a decent set of results that were in line with our but above consensus
estimates, boosted by higher margins from Hirotako, which makes highmargin
airbags. The 1Q net profit came in at RM41m (y-o-y: 6.8%, q-o-q: 58%) on revenue
of RM543.7m (y-o-y: 32.7%, q-o-q: 0.9%). The numbers made up 21% and 25% of our
full-year forecasts respectively. The revenue growth was attributed to the acquisition
of Hirotako and higher vehicle sales from Federal Auto, which were up by 9% and
55% respectively. We deem the results in line as we expect the ensuing quarters
to be stronger driven by: i) improved sales of Perodua, which was hit by
tighter lending by the banks, ii) higher sales from Volkswagen after the launch
of the new Polo sedan, which is the German marque’s cheapest product in its
line-up.
Margins fuelled
by Hirotako on economies of scale.
We note that margins were boosted by the high margins from the airbag
manufacturing business following the acquisition of Hirotako in 4QFY11. We
understand that Hirotako benefited from the economies of scale achieved as
production surged when new safety rules
requiring all national cars to be fitted with at least 2 frontal airbags
took effect this year. This led to sales
higher perking up by 9% y-o-y, although Perodua
and Proton’s sales combined actually contracted 12% y-o-y.
Maintain BUY. MBM has completed its proposed
rights and bonus issue. The rights shares, priced at a discount of 43%
to yesterday’s closing price, gives
investors an opportunity to accumulate
more MBM shares at a discounted price.
We maintain our BUY call and earnings estimates but lower our SOP fair value to
RM4.58 from RM5.34 previously, which implies a PE multiple of 9x versus the
sector average of 10x. The reduced FV
reflects the lower PE multiple of 10x pegged to Perodua’s valuation versus 12x
earlier after incorporating the risk of
a limited upside in vehicle
sales after the implementation of stricter lending
guidelines put a dent on lending approval rates. MBM is now trading at an
attractive 6x FY12 EPS. We note that the stock has of late attracted new
institutional investors such as Tabung Haji and even foreign funds.
Source: OSK
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