KUALA LUMPUR (Aug 21): Shares in MBM Resources reached an all-time high in active trade this morning, after it reported that its net profit for the second quarter ended June 30, 2019 (2QFY19) more than doubled to RM74.04 million, from RM34.55 million last year, on the back of a one-off RM24.8 million gain on disposals.
At 10:17am, the counter rose 10.08% or 37 sen to RM4.04, valuing the company at RM1.58 billion. The counter saw 4.52 million shares transacted.
According to Bloomberg, as of today, all eight analysts who cover the stock have placed buy calls on MBM Resources, and with a 12-month consensus target price of RM4.42.
In a bourse filing yesterday, the group revealed its 2QFY19 net profit had increased to RM74.04 million, from RM34.55 million last year, with quarterly revenue growing 15.42% to RM558.05 million, from RM483.48 million last year.
MBM Resources declared a first interim dividend of six sen a share, payable on Sept 19.
Cumulative net profit for the six months ended June 30 (6MFY19) grew 83.62% to RM123.69 million, from RM67.36 million in the corresponding period last year, while revenue rose 15.15% year-on-year to RM1.08 billion, from RM935.41 million.
In a note today, RHB Research Institute Sdn Bhd said MBM Resources was trading at 8.1 times price-earnings ratio (PER), and that it looks undervalued compared to similar companies in the automotive sector, which are trading at 12 times to 14 times.
"Future earnings growth will be driven by expansion of Perodua's product range and improvements in operations efficiency. We make no changes to our TP (target price), derived from applying a target P/E of 9x (the 5-year mean) to 2020 earnings," said the research house.
RHB Research has maintained its buy call on the stock with an unchanged TP of RM4.20.
Meanwhile MIDF Amanah Investment Bank Bhd Research, which also maintained its TP of RM4.20 and buy call on the stock, said MBM Resources remains its top sector pick, based on 7 times forecasted financial year 2020 (FY20F) earnings with 8% yield.
It noted that MBM Resources remains a cheap proxy to Perusahaan Otomobil Kedua Sdn Bhd (Perodua)'s volume expansion and the spillover on its parts manufacturing and Perodua dealership units.
"Key catalysts: strong 6% y-o-y Perodua TIV (total industry volume) expansion (FY19F) on the back of the Aruz to fill up a vacuum in Perodua's model mix and a recovery in industry production driven by the new national car launches. Risk to our call is weaker-than-expected demand for the Aruz and a weak ringgit," said MIDF Research.
Kenanga Research maintained its outperform call on the stock, while raising its TP to RM4.40, from RM3.45 previously.
It noted its profit after tax and minority interest (PATAMI) came in above both its and consensus expectations of 56% of full-year estimates due to higher-than-expected associates' contribution and earnings from its auto-parts segment.
"We reiterate our outperform call with a higher TP of RM4.40 from RM3.45, based on higher PER of 9 times on revised FY20E earnings per share (EPS) (at five-year Fwd historical mean PER), rolling over from 8 times FY19E EPS (at -1 standard deviation). Our higher PER is premised on uncertainty removed following the cessation of loss-making alloy wheels business. Risks to our call include: (i) lower-than-expected car sales volume, and (ii) lower-than-expected associates' contribution," the research house said.