PETALING JAYA: MBM RESOURCES BHD’s share price jumped 9% to RM4 yesterday after the company announced that its profits for the second quarter ended June 30 had more than doubled year-on-year.
Its second quarter profit rose to RM74.04mil from RM34.55mil in the same quarter a year ago while revenue also increased to RM558.05mil from RM483.48mil previously.
MIDF Research said MBM’s profits were well within its expectations but ahead of consensus.
Other than the improved profit, the company’s shares also gained further interest following a revision in its dividend policy to pay a minimum of 60% of net profit, which is a significant improvement compared to the 14% payout seen in the past two years.
MIDF Research said in a report that it had expected MBM’s shares to react positively.
“At our current forecast FY19, its implied dividends at 60% payout translate to a generous 7.7% yield. The share price should react very positively to this announcement, ” MIDF Research said.
“In fact, this could potentially address the drag on MBM’s valuations, which have historically traded at a discount (below nine times price-to-earnings ratio) against the sector’s average of about 12 times, and catalyse a strong valuation re-rating, ” it added.
MIDF Research, which maintained its “buy” call on MBM with an unchanged target price of RM4.20, said the company remained the sector’s top pick.
“MBM remains a cheap proxy to Perodua’s volume expansion and the spillover on its parts manufacturing and Perodua dealership units, ” the research house said.
Meanwhile, AMInvestment Bank Research noted that MBM’s results in the latest quarter also included a one-off gain of RM24.8mil from the disposal of its stakes in associate companies Hino Motor Sales Malaysia (HMSM) and Hino Motors Manufacturing Malaysia (HMMM).
This had, in turn, reduced MBM’s shareholdings in both HMSM and HMMM to 20% from 42%.
MBM’s strength was also seen from the favourable demand for Perodua vehicles – Myvi, Axia and Aruz.
Perodua sold a total of 121,800 units in the first half of 2019 compared to 117,000 units in the same period of the previous year, which translated into a 4% growth year-on-year.
“The motor trading division is still the key revenue driver of the group, contributing 89% of revenue and 13% of pre-tax profit in the first half of 2019, ” AMInvestment Bank Research said.
It rated MBM a “buy” with an unchanged fair value of RM4.05 based on a forecast FY20 price-to-earnings of 9 times.
“We believe that MBM will continue to shine as a proxy to Perodua as it protracts its position as the leader of market share in the local automotive space, ” it said.