KUALA LUMPUR: MBM Resources Bhd
is expected to benefit from robust earnings from Perodua Bhd in 2019 as the carmaker rolls out exciting new model launches while maintaining strong demand for its existing models.
In its outlook on MBM for 2019, Affin Hwang Capital research said MBM is expected to see associate earnings growth from Perodua as well as the distribution of Perodua sales in Malaysia through its 51.5%-owned subsidiary, DMM Sales Sdn Bhd.
"We raise our EPS forecast by 14% for 2019-20E, and maintain our BUY with a higher target price of RM3.70 (from RM3.27). At 6x 2019E PER, MBM’s valuation is compelling," it said.
The group's alloy wheel unit, OMIA, is expected to remain loss-making although this is expected to narrow in FY19.
Affin Hwang said OMIA is expected to see stable volume from supplying Perodua's alloy wheels, better production efficiency and possible capacity take-up by Citic Dicastal.
It added that the group's current focus is on minimising losses rather than its previous plan to increase production capacity to one million units per year from 750,000 units per year.
Affin Hwang expects overall auto sales to improve in 2019 due to new model launches, cheaper ar prices and improving consumer sentiment/spending power which will bode well for MBM's auto trading and auto parts division.