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By RHB Re­search Buy (up­graded) Tar­get price: RM2.70

MBM Re­sources has reg­is­tered solid first half 2018 re­sults, with net profit grow­ing 89% year-on-year (y-o-y), mainly on bet­ter-than-ex­pected sales of Pero­dua’s Myvi.

How­ever, its third quar­ter 2018 earn­ings are likely to be se­quen­tially softer, on lower Pero­dua sales vol­ume – the re­sult of a re­cent Myvi sup­ply dis­rup­tion.

RHB Re­search es­ti­mates the net profit for this pe­riod to come in at about RM18mil, im­ply­ing 0.7% y-o-y and 48% quar­ter-on-quar­ter (q-o-q) de­clines in core earn­ings.

“Go­ing for­ward, we ex­pect some im­prove­ments with Pero­dua sales nor­mal­is­ing, trac­tion on Volvo sales (with the in­tro­duc­tion of the XC40 SUV), and nar­row­ing losses from the al­loy wheels busi­ness.

“We still ex­pect MBM to re­main re­liant on Pero­dua to drive earn­ings,” said RHB Re­search.

“Based on the lat­ter’s strong track record in in­tro­duc­ing the right prod­uct for the mar­ket, the re­search house ex­pects Pero­dua to con­tinue its lo­cal mar­ket lead­er­ship. It re­cently launched the up­dated Alza and has a B-seg­ment SUV in the pipe­line.

Volk­swa­gen sales are likely to be softer, fol­low­ing weak Septem­ber sales de­spite the tax hol­i­day pric­ing ex­ten­sion un­til Novem­ber 30 – on the ab­sence of com­pelling new mod­els.

Mean­while, Volvo Malaysia re­cently added the XC40 to its SUV line-up, with the S60 sedan slated for launch in the third quar­ter of 2019. On the au­toparts busi­ness, the out­look for MBM’s al­loy wheels busi­ness re­mains chal­leng­ing due to high cast­ing wheel re­jec­tion and low util­i­sa­tion rates.

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