MBM Resources Bhd (+ve)
MBMR (Fundamental: 1.4/3, Valuation: 1.2/3) distributes a number of vehicle brands including Daihatsu, Mitsubishi, Volvo and Volkswagen. However, the company derives most of its earnings from its 20% associate, Perodua, the market leader in Malaysia.

MBMR has a solid balance sheet with net gearing of only 7.3% at end-Sept 2014. Between 2009 and 2013, pre-tax profit grew by a CAGR of 22.8% on the back of 19.3% CAGR in sales.

For 9M2014, sales dropped 10.1% y-o-y to RM1.6 billion while pre-tax profit slumped 19.9% to RM119.6 million, mainly due to lower sales volume.

For 2015, Perodua targets 6% growth in car sales, higher than the 2% total industry volume growth forecast by the Malaysia Automotive Association (MAA). The carmaker’s volume sales jumped 33% y-o-y in January 2015, thanks to overwhelming response to new model, the Axia. By comparison, main rival Proton saw a 9% decline in volume sales despite launching Proton Iriz.

This article first appeared in The Edge Financial Daily, on February 27, 2015.