MBM Resources Bhd (Nov 11, RM3.09)
Maintain underperform with fair value RM2.70: MBM Resources’ 3Q11 results disappointed, coming in below our and consensus estimates. Net profit of RM35.3 million rose 67.3% quarter-on-quarter (q-o-q) and 3.3% year-on-year (y-o-y), taking cumulative 9M11 earnings to RM94.8 million (-16.1% y-o-y) which amounted to 71% of our previous 2011 estimate. The main reason for the deviation was weaker-than-expected associate contributions arising from unfavourable yen exchange rates that squeezed profit margins.
Overall earnings for the quarter improved sequentially on the back of a 10.3% q-o-q improvement in total industry volumes (TIV). Recall 2Q11 earnings were negatively affected by earthquake-related supply constraints and the transition to the new Myvi model (launched on June 15) that resulted in associate contributions falling 46.9% q-o-q and 50.9% y-o-y to just RM16.9 million.
With 3Q11 Perodua sales jumping 41.2% q-o-q to 47,719 units and Hino truck sales up 7.5% q-o-q to 1,545 units, associate earnings rebounded to RM29.4 million (+73.5% q-o-q and +10.4% y-o-y) although this was below expectations as a result of unfavourable yen exchange rates that negatively affected margins at 23.6%-owned associate Perodua.
MBM’s core auto distribution business performed broadly in line with expectations with Daihatsu and Hino truck dealership sales volumes recording a 13.6% y-o-y decline in sales while Perodua car dealership volumes declined 7.2% y-o-y.
Federal Auto dealership of Volvo, Volkswagen and Mitsubishi vehicles rose 57.3% y-o-y implying gains in dealership market shares as TIV for the three marques only rose 29.3% y-o-y.
We trim MBM’s 2011 earnings estimate by 3.4% after cutting estimates at Perodua. After tweaking our assumptions, 2012 earnings are raised by 1.3% and 2013 by 2.1%.
Upside risks include stronger car sales, favourable forex trends and reduced competition.
We revise our fair value estimate to RM2.70 (from RM2.65) following our earnings revisions, derived from ascribing an unchanged five times target price-earnings ratio (PER) to 2012 earnings. Our “underperform” recommendation is unchanged.
MBM’s proposals to sell 20% in Daihatsu (M) Sdn Bhd and takeover of Hirotako Holdings remain pending. We remain cautious on prospects for the auto sector given the backdrop of rising global macroeconomic uncertainties and escalating downside risks to equity valuations. — RHB Research, Nov 11
This article appeared in The Edge Financial Daily, November 14, 2011.
Maintain underperform with fair value RM2.70: MBM Resources’ 3Q11 results disappointed, coming in below our and consensus estimates. Net profit of RM35.3 million rose 67.3% quarter-on-quarter (q-o-q) and 3.3% year-on-year (y-o-y), taking cumulative 9M11 earnings to RM94.8 million (-16.1% y-o-y) which amounted to 71% of our previous 2011 estimate. The main reason for the deviation was weaker-than-expected associate contributions arising from unfavourable yen exchange rates that squeezed profit margins.
Overall earnings for the quarter improved sequentially on the back of a 10.3% q-o-q improvement in total industry volumes (TIV). Recall 2Q11 earnings were negatively affected by earthquake-related supply constraints and the transition to the new Myvi model (launched on June 15) that resulted in associate contributions falling 46.9% q-o-q and 50.9% y-o-y to just RM16.9 million.
With 3Q11 Perodua sales jumping 41.2% q-o-q to 47,719 units and Hino truck sales up 7.5% q-o-q to 1,545 units, associate earnings rebounded to RM29.4 million (+73.5% q-o-q and +10.4% y-o-y) although this was below expectations as a result of unfavourable yen exchange rates that negatively affected margins at 23.6%-owned associate Perodua.
MBM’s core auto distribution business performed broadly in line with expectations with Daihatsu and Hino truck dealership sales volumes recording a 13.6% y-o-y decline in sales while Perodua car dealership volumes declined 7.2% y-o-y.
Federal Auto dealership of Volvo, Volkswagen and Mitsubishi vehicles rose 57.3% y-o-y implying gains in dealership market shares as TIV for the three marques only rose 29.3% y-o-y.
We trim MBM’s 2011 earnings estimate by 3.4% after cutting estimates at Perodua. After tweaking our assumptions, 2012 earnings are raised by 1.3% and 2013 by 2.1%.
Upside risks include stronger car sales, favourable forex trends and reduced competition.
We revise our fair value estimate to RM2.70 (from RM2.65) following our earnings revisions, derived from ascribing an unchanged five times target price-earnings ratio (PER) to 2012 earnings. Our “underperform” recommendation is unchanged.
MBM’s proposals to sell 20% in Daihatsu (M) Sdn Bhd and takeover of Hirotako Holdings remain pending. We remain cautious on prospects for the auto sector given the backdrop of rising global macroeconomic uncertainties and escalating downside risks to equity valuations. — RHB Research, Nov 11
This article appeared in The Edge Financial Daily, November 14, 2011.
