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Wednesday, March 4, 2020

AmInvestment maintains 'buy' on MBMR, FV of RM5.54 on met FY19 expectations

ANALYST REPORTS
Thursday, 27 Feb 202010:22 AM MYT

KUALA LUMPUR: AmInvestment Bank research has kept its buy call on MBM RESOURCES BHD and fair value of RM5.54 following an FY19 earnings announcement that met expectations.

According to the research house, the group's core net profit of RM188.9mil was 3% higher year-on-year (y-o-y) and came to 97% and 93% of its and consensus estimates respectively.

MBM's motor trading division was the main contributor to FY19 revenue growth of 10% y-o-y at RM2.1bil.

"We believe that this was due to a sustained demand for Perodua vehicles (+4.9% YoY), especially for the Myvi, Axia and Aruz.

"Perodua sold a total of 240.3K units in 2019 vs. 227.2K units in 2018 (+6% YoY)," said AmInvestment.

However, the motor trading division posted a lower FY19 pre-tax profit of RM21.5mil due to write-off in one-off costs of RM9.5mil.

In the auto parts manufacturing division, revenue came in 13% higher y-o-y at RM220.5mil. The division's pre-tax profit improve signifcantly after the cessation of OMI Alloy operations to RM11.2mil from RM900,000 previously.

"We notice stronger earnings contribution from Hirotako Acoustics (HASB) and Oriental Metal Industries (OMI) with a stronger sales revenue of 16.1% and 2.7% respectively," said AmInvestment.

Finally, MBM's associate recorded a pre-tax profit of RM187.8mil, which was 4% higher y-o-y, in FY19 due to perodua's robust earnings contribution.

The research house noted that the group's associate earnings contributed to about 83% of its pre-tax profit in FY19.

It added that MBM's net cash position more than doubled to RM227.8mil in the final quarter of 2019, reflecting a healthier balance sheet.

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