THE worst is over for MBM Resources Bhd following the washout quarter it had seen for the second quarter of its 2020 financial year ended June 30 2020, according to analysts.
“2Q20 was a washout quarter, but this had been well expected. The movement control order (MCO) ran from March 18 till May 5, which affected most of 2Q20 given the shutdown of manufacturing and sales operations,” said MIDF Research analyst Hafriz Hezry.
The analyst also noted that MBM’s dealership operations managed to turn in a pre-tax profit of RM5 mil given the mitigative actions taken during the MCO to tighten cost control and manage working capital.
This follows MBM slipping into the red for the quarter just ended, registering a net loss of RM5 mil, thus bringing the earnings for the first half of 2020 to RM22 mil.
However, Hafriz believes that the sharp recovery of auto sales by Perodua, which saw a dramatic improvement from June due to the sales tax holiday, bodes well for MBM’s other operating units.
“Perodua’s June total industry volume (TIV) of 21,250 units marked a 33% year-on-year (yoy) increase and more than doubled its May TIV. This was followed by its latest July TIV of 23,203
units, which is a 17% yoy increase,” said Hafriz.
AmInvestment Bank analyst Jeremie Yap also expects MBM to record a stellar recovery in 2H20, due as well to the sales tax holiday.
Yap also noted that MBM’s balance sheet remains strong with a net cash position of RM166.8 mil as of June 30, with the group also announcing a first interim dividend of 5 sen.
MIDF and AmInvest both maintained buy calls on MBM, while maintaining a target price of RM3.80 and a fair value of RM4.62 respectively.
“Our buy call is also premised on the belief that Perodua cars would recover more quickly
compared to other brands because of its more attractive pricing for its model line-up and value propositions,” said Yap.
At the end of the trading day, MBM’s shares were last done at RM3.24, up 8 sen, with 525,800 shares traded. – Aug 21, 2020
