RHB upgrades MBM Resources, says stock 'too cheap to ignore'

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KUALA LUMPUR (Nov 7): RHB Research Institute Sdn Bhd said today it has upgraded MBM Resources Bhd shares to "buy" from "trading buy" after MBM's share price corrected 20% in the past six months.

MBM, which manufactures automotive parts, also owns a 20% stake in Perusahaan Otomobil Kedua Sdn Bhd (Perodua), according MBM and Perodua's websites.

RHB wrote in a note it had raised its MBM share target price to RM2.70 from RM2.56. At Bursa Malaysia today, MBM shares were traded unchanged at RM2 at 10:49am.

"We raise our TP to RM2.70 from RM2.56 after rolling forward our base year to 2019, with a target P/E of 9x, close to its 5-year mean. At current levels, the stock is inexpensive when compared to peers, but lacks near-term re-rating catalysts. Nonetheless, at a prospective FY19 P/E of just >6x, the stock is too cheap to ignore.

"We revise our FY18F-20F earnings (by) 6-14% to reflect an increase in estimated Perodua sales volumes after strong traction on the Myvi and change in JPY/MYR FX assumptions to follow the house view. Key risks to our call: weaker consumer sentiment and unfavourable FX trends," RHB said.