Perodua’s new B-segment SUV launch seen as catalyst for MBM Resources

This article first appeared in The Edge Financial Daily, on January 10, 2020.
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MBM Resources Bhd
(Jan 9, RM4.05)
Maintain buy with an unchanged target price (TP) of RM4.55:
Perusahaan Otomobil Kedua Sdn Bhd (Perodua) launched its 2020 Bezza facelift, which comes in four variants priced between RM34,580 and RM49,980. The facelifted Bezza comes with a redesigned front and rear end with a much bolder look, while the interior remains largely similar but with revised trim designs. However, the significant change is the incorporation of Perodua’s Advanced Safety Assist 2.0 (ASA) versus ASA 1.0 in the outgoing model, though this is only available for the top AV variant. ASA 2.0 was first introduced for the latest Myvi and later the Aruz. VSC (vehicle stability control) and ABS (anti-lock brake system) comes standard across all variants versus for the AV variant only previously. Other equipment features include keyless entry, front corner sensors, reverse sensors and a reverse camera.

The facelifted Bezza is packing up on features and is the most affordable sedan in Malaysia to be equipped with AEB (auto emergency braking). This should help Perodua keep up with Proton which has been doing the same in the past year for its A/B-segment models. The Bezza is one of Perodua’s key volume drivers, generating about 4000-unit sales per month and accounting for an estimated 20% of Perodua’s TIV. Perodua management’s target sales of 4,000 units per month for the facelifted Bezza is in-line with historical sales.

Other than the facelifted Bezza, Perodua is scheduled to introduce its B-segment sport utility vehicle (SUV), possibly in the second half of 2020, positioned below the Aruz which is priced at RM70,000–RM80,000. The Alza is also long overdue for a replacement, first launched in 2009 with its last facelift in 2018. Our forecast for a 1.6% year-on-year growth in Perodua’s FY20F TIV at this juncture is conservative.

We reaffirm our “buy” call on MBM Resources Bhd (MBM) at an unchanged TP of RM4.55 per share. At just seven times financial year ending Dec 31, 2020 forecasted (FY20F) earnings coupled with an attractive 6.7% yield, MBM remains a cheap proxy to Perodua’s volume expansion and the spillover on its parts manufacturing and Perodua dealership units. Key catalysts: i) launch of Perodua’s new B-segment SUV in FY20F; ii) a recovery in industry production driven by the new national car launches; and iii) sale of OMI Alloy (M) Sdn Bhd assets. Risk to our call is weaker-than-expected demand and a weak ringgit. — MIDF Research, Jan 9