KUALA LUMPUR (Nov 22): Hong Leong Investment Bank Research (HLIB) has maintained its “Buy” call on MBM Resources Bhd at RM3.70 with a higher target price of RM5.50 (previously RM4.80) based on 10% discount to sum-of-parts (SOP) of RM6.13, with attractive dividend yield of 4.9%-7.0%.
In a note today, HLIB Research said MBM reported 3QFY19 profit after tax and minority interests (PATAMI) of RM53.7 million (+7.5% q-o-q, +34.4% y-o-y), boosting 9MFY19 core PATAMI to RM145.7 million (+34% y-o-y).
This was said to be due to better-than-expected contribution from its associate Perodua and higher dealership profit.
“OMIA (OMI Alloy Sdn Bhd) has been categorised as a discontinued business unit, which has dragged MBM’s bottomline with losses of RM1.8 million in 3QFY19 and RM9.6 million in 9MFY19,” it said.
According to HLIB, MBM has also recorded a gain of RM1.3 million (exceptional item) for the disposal of an investment property during the quarter.
MBM is expected to continue leverage on the sustainable sales of Perodua, while its automotive components manufacturing may leverage on the sales growth of Perodua and the commencement of Proton CKD program.
“We expect 4QFY19 earnings to be relatively flat q-o-q with sustained Perodua contribution,” HLIB said.
“We increase our earnings forecast for FY19, FY20 and FY21 by 9.8%, 6.7% and 1.9% following higher assumptions of Perodua contribution,” it added.
At 9.21am, MBM shares rose 29 sen or 7.84% to RM3.99.