KUALA LUMPUR (Aug 21): Analysts are mixed about the prospects for MBM Resources Bhd (MBMR), following a swing to loss for its latest financial quarter.
In a research note, Kenanga Research has maintained its "underperform" call for the stock with an unchanged target price of RM2.80, following the group posting results deemed lower than expected.
It said MBMR's core profit after tax and minority interest (PATAMI) for the first half ended June 30, 2020 (1HFY20) of RM22.3 million came in below the research house's and consensus expectations at 17% of their full-year estimates.
Following the weaker-than-expected results, Kenanga Research cuts MBMR's full-year core net profit for FY20 by 10% to reflect the weaker-than-expected margin. Now, the research house expects MBMR to generate a PATAMI of RM120.8 million for FY20, 37% lesser than RM192 million recorded for FY19.
On its outlook, while Kenanga Research said it expects pent-up demand sales during the sales and service tax (SST)-exempted period, overall growth could be capped by higher production costs to deliver backlog of bookings due to a weakening ringgit against greenback, extra work hours, and extra auto parts outsourcing costs — which could further be affected by bottlenecks in auto parts supply chain during this global pandemic.
However, AmInvestment Bank Research, which has maintained its "buy" call with an unchanged fair value of RM4.62 for MBMR, has a rather optimistic view about the company's prospects.
The research house said the worst is over and it expects MBMR to record a stellar recovery in the second half of this year, empowered by the implementation of the SST holiday from June 18 until Dec 31, 2020.
"Our 'buy' call is also premised on the belief that Perodua cars would recover more quickly compared to other brands because of its more attractive pricings for its model line-ups and value propositions," it added.
Nonetheless, it expects the company to generate a net profit of RM154.4 million for FY20, less than the RM188.9 million booked for FY19.
Meanwhile, it said MBMR's 1HFY20 core net profit of RM22.2 million was within expectations, though it only came in at 14% and 17% of house's and consensus full-year forecasts, respectively.
Similarly, Affin Hwang Capital Research deemed MBMR's 1HFY20 results of RM22 million as within expectations, as the research house expects the sales volume of 22%-owned Perodua to rebound on sales tax exemption.
The research house has kept its earnings estimates unchanged, pending on further updates from the upcoming results briefing. It anticipates the company to generate a net profit of RM107.1 million for FY20, RM129.2 million for FY21 and RM151.2 million for FY22.
This translates into earnings per share of 27.3 sen for FY20, 33 sen for FY21 and 38.6 sen for FY22.
Affin Hwang Capital Research has maintained a "hold" call but with a lower target price of RM3.20 from RM3.60 previously based on 10 times 2021 earnings per share. At such valuation, it said the negatives are largely priced in.
To recap, MBMR slipped into a net loss of RM5.18 million for the second quarter ended June 30, 2020 (2QFY20) as a result of the suspension of business due to the implementation of the Movement Control Order followed by the Conditional Movement Control Order during the quarter under review, which took a toll on auto sales.
In contrast, the company posted a net profit of RM74 million for the corresponding quarter a year ago. Its quarterly revenue dropped sharply to RM258.6 million, down nearly 54% compared with RM558 million a year ago.
On a quarter-to-quarter basis, the auto maker's revenue was 31% lower against RM374 million in the preceding quarter. It recorded a net profit of RM27.22 million for 1QFY20.
By noon break, the stock was traded 13 sen or 4.11% higher at RM3.29, valuing it at RM1.25 billion. Some 287,600 shares were traded.
The stock has risen 31% from its March's low when it was traded at RM2.52. But, it is still down 15% year-to-date, compared woth RM3.86 on Dec 31, 2019.