KUALA LUMPUR: Affin Hwang Capital Research says MBM Resources Bhd
's earnings of RM16.2mil in the second quarter ended June 30, 2017, came in below its and consensus forecasts.
According to the research house, the company's lacklustre performance was owing to lower vehicle sales, lower associate contributions and margin compression.
MBM's revenue in the first six months of this year inched up by 2.6% to RM822mil, attributed to the better performance from motor trading and auto parts manufacturing. However, net profit declined 4.3% year-on-year to RM35.6mil, mainly owing to lower-than-expected associate contributions.
The net profit accounted for 36% of Affin Hwang Research's and consensus forecasts, respectively.
On a quarter-on-quarter basis, overall revenue fell 3.4%, affected by weaker motor trading
but higher production volume by the alloy wheel plant and better average selling prices from the tyre assembly line helped the auto parts manufacturing segment.
Operating margin increased by a marginal 0.3ppt. Associate contributions fell due to weaker Perodua sales, Hino truck and buses and decline of JV Autoliv Hirotako.
Affin Hwang Research has lowered its 2017-19E forecasts by 31%/20%/19% after imputing for weaker operating margins and lower associate contributions.
Affin Hwang Research maintains its "hold" call on the stock with the target price lowered to RM2.10 after rolling forward valuations to FY18 based on unchanged target PER of 9x.
The research house guides that upside risks could be in the form of improvement in consumer spending resulting in higher auto sales and improvement in banks' hire-purchase approvals. A downside risk could be lower-than-expected car sales volume.
Win a prize this Mother's Day by subscribing to our annual plan now! T&C applies.
