MBM Resources to appoint Iveco contract assembler by 3Q15

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SHAH ALAM (Apr 28): Federal Auto Holdings Bhd, a wholly-owned unit of automotive distributor and retailer MBM Resources Bhd, expects to appoint a contract assembler to put together Italian brand Iveco S.p.A’s commercial vehicles as early as the third quarter of this year (3Q15).

“We are currently in talks with two contract assemblers to manufacture the Iveco vehicles, and also with the government to obtain regulatory approval. It is close to finalisation.

“We are trying to get the best deal and ironing out the details. Manufacturing is expected to begin by year-end, if not by early next year,” Federal Auto managing director Cheng Seng Fook told reporters, after launching the Iveco brand of commercial vehicles here this afternoon.

Cheng said the arrangement to locally assemble Iveco commercial vehicles may position Malaysia as its manufacturing hub in Asia in the long run, though he qualified the discussion is very much preliminary at the moment.

“At the moment, Iveco does not have a manufacturing hub in Asia. However, Iveco recently made its foray into emerging markets such as Thailand and Taiwan. It also has presence in Indonesia, Brunei, Singapore and Papua New Guinea, and all the models sold there are imported from Italy,” he said.

As for Federal Auto’s tie-up with Iveco, he said the partnership does not come with any profit guarantee.

To recap, Federal Auto via its wholly-owned unit F.A. Trucks Sdn Bhd had on August 6 last year signed a distribution agreement with Iveco to exclusively distribute the latter's products in the country, as Federal Auto seeks to expand its revenue-base and become "the most complete automotive group".

On its maiden foray into Malaysia, Iveco Asia Pacific Brand Leader Michele Lombardi said the company will begin by offering 14 models and the pricing will start from RM106,000. The models, he added, will be rolled out in stages, over the next 18 months.

“As for the commercial vehicles, we began our mark in Malaysia not too long ago, by supplying our models to be used as ambulance in public hospitals, as well as Intrakota bus in Kuala Lumpur.

“Malaysia is an important market with a dynamic automotive sector. With Federal Auto, we are confident that discerning fleet, transport operators and business owners in Malaysia will appreciate European technology,” said Lombardi.

This year, Cheng expects to sell 100 Iveco models, driven by the brand’s Daily and Stralis models. Daily is regarded as a light commercial vehicle, while Stalis is for heavier commercial use.

“Once we begin the contract manufacturing, we expect to sell between 300 and 400 units in the next two years. We have a complete line-up that will cater for the growing demands of the trucking industry, not only in terms of tonnage required, but also in terms of power, torque, safety, ergonomics, comfort and reliability,” said Cheng.

He said Federal Auto has allocated some RM15 million to ramp up its distribution channel this year.

Besides the Iveco’s vehicles, Federal Auto also distributes Volvo, Volkswagen and Mitsubishi marques.

“As a group, we expect Federal Auto to maintain total sales at around 500 units per month. We have not revised this target, as we have yet to see the impact of the goods and services tax (GST). We [hope to] keep the momentum going for upcoming months,” he added.

As at 2.42pm, MBM Resources (fundamental: 1.4; valuation: 1.4) shares were untraded at RM3.37, which gives it a market capitalisation of RM1.317 billion.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)