MBM Resources Bhd
(Jan 16, RM2.91)
Maintain buy with target price of RM4.80: Perodua launched the Myvi facelift last Thursday, with six variants offered, retailing at RM42,000-RM59,000 — a RM400 jump from previous prices.
The facelift model retains the same engine options while changes were mainly on aesthetics and other features as well as structural enhancements, boosting Myvi’s New Car Assessment Program for Southeast Asia safety rating to 4 stars (from 3).
The automatic variants adopt a new 4-speed gearbox which we believe is the same locally-assembled unit found in the Perodua Axia.
Perodua expects to sell 6,000 units/month of the Myvi facelift while the company expects overall sales for the brand to hit 208,000 units in 2015. Should this materialise, it would be the first time Perodua’s sales volume exceeds the 200,000 threshold. The highest sales volume recorded was 196,000 in 2013.
The ringgit has weakened to over RM3.05 to 100 yen with year-to-date average of RM2.99/100 yen. The movement was largely due to concerns over the country’s fiscal health following the collapse in crude oil prices.
Concurrently, MBM’s share price has retraced by 5% to RM2.84 from RM3 in early January.
Despite Perodua’s strong sales volume projection, we retain our financial year 2015 (FY15) forecast for the brand at 197,000 as we expect demand to remain soft, mitigated by softening consumer sentiment ahead of the goods and services tax imposition and the economic uncertainty.
Meanwhile, we make no changes to our RM2.95/100 yen rate assumption for now as we expect the ringgit to stabilise at current levels.
The stock is our top pick for the sector and the broader market as we expect performance of its subsidiaries and Perodua contribution to rebound in FY15.
MBM continues to trade at undemanding valuations of only 6 times FY15 price-earnings ratio while dividend yield is fairly attractive at 4.2% based on a 26% payout ratio. — MIDF Research, Jan 16
This article first appeared in The Edge Financial Daily, on January 19, 2015.