KUALA LUMPUR (Jan 21): MBM Resources Bhd rose as much as 13 sen or 4% to RM3.06 after AmResearch Sdn Bhd upgraded shares of the automobile distributor to “buy” from "hold" with a higher target price of RM3.40 from RM3.30 previously.

AmResearch also upped its earnings forecast for MBM (fundamental score: 1.4; valuation score: 1.2) by 9% and 14% for financial years ending December 31, 2015 and 2016 respectively.
 
MBM shares had subsequently pared gains. At 12:09am, MBM changed hands at RM3.03 with 358,700 shares done.

AmResearch said MBM had seen battered valuations following its share price decline over the past 12 months.

AmResearch noted that MBM’s share prices had declined 13% over the past 12 months as its  20% associate Perusahaan Otomobil Kedua Malaysia Sdn Bhd's (Perodua) total industry volume stalled and as Perodua registered  start-up cost for its new plant.

"(MBM's) valuations, which have retreated to below mean (7.9x FY15FPE) sufficiently reflect the EPS deceleration in FY14," AmResearch said.

AmResearch also likes MBM’s improving earnings prospect, backed by the introduction of the Perodua Axia to the market.

“The Axia has garnered (more than) 70,000 bookings since its launch (average 15,000 bookings per month or 95% of Perodua’s 2014 montly TIV) with 29,000 units delivered up to December 2014,” AmResearch said.

(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.)