Cautiously optimistic on MBM Resources despite near-term volatility

KUALA LUMPUR: RHB Research is staying cautiously optimistic on MBM Resources Bhd despite the ongoing nationwide MCO3.0, which should affect near-term footfall into its showrooms.

Following underwhelming April sales orders, the research house expects sales to be supported by the backlog of orders, recent new model launches and the replacement cycle.

There was a dip in Perodua's April sales volume of about 17% owing to a shortage in semiconductor chips. This brought year-to-date sales as at end-April to 78,304 units, which was slightly disappointing at 33% of RHBs full-year forecast of 235,000 units.

Conversely, RHB had expected consumers to ramp up purchases, leading to a stronger 1H21.

The research house believes the chip shortage to be concentrated in the Myvi rather than across the board, leading to a rationing in vehicle production and limiting knee-jerk sales volume drops in the coming months.

"Excluding this, we maintain our sales volume at this time, as we believe buying interest should continue to sustain throughout FY21.

"This will be supported by the backlog of orders, recent new model launches, and replacement cycle, in our view," it said.

Perodua maintained its sales target of 240,000 units, up 9% year-on-year (y-o-y), and production target of 272,000 units, up 23% y-o-y.

In adjusting its forecasts, RHB cut its FY21-23 earnings by 2% to 3% to account for a strong US dollar/ringgit of RM4.15 for FY21 and RM4.25 for FY22 and beyond.

"We understand the impact is generally not significant and can be recovered through FX price negotiations with customers.

"We make no other changes to our key assumptions," it said.

The research house rolled forward its valuation base year to FY22 and lowered its price-earnings to 8x from 9.5x as it believes the near-term catalysts are priced in following the launch of the Ativa.

Keeping its "buy" call, RHB's target price was lowered to RM3.80 from RM4.30 previously.
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RHB Research , MBM Resources , Perodua , automotive


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