FY21 results were above expectation
U/G to BUY, TP lifted to MYR4.00
FY21 results came above our FY estimate, on stronger-than-expected QoQ performance, mainly from its 23%-owned Perodua (P2; 3.3x jump in vehicles sales). We raise FY22-23 earnings by 15%-16%, on stronger consumer spending post-pandemic, favouring P2. Our revised TP (+16%), pegged to an unchanged 8x FY22 PER (mean) offers a 29% upside.
Spectacular 4Q21 performance; 15 sen DPS
MBM reported core net profit of MYR109m in 4Q21 (vs. –MYR5m in 3Q21), which took FY21 core earnings to MYR168m (-4% YoY). The QoQ turnaround was impressive, driven largely by P2’s performance. It recorded a spectacular 3.3x QoQ jump in vehicle sales to 71.2k units in 4Q21 (FY21:
190.3k units), driven by the relaxation of the movement control restrictions. This is impressive despite coming up short of its FY21’s 200k units expectation. Meanwhile, MBM declared an interim/ final DPS of 5/10 sen respectively in 4Q21 (FY21 DPS: 20 sen; 47% DPR).
Raise FY22-23 earnings; the Perodua push factor
The earnings setback in FY21 (-4% YoY) from the pandemic is well-flagged (chips supply issue, stocks shortages). Focus is on an improved FY22 onwards, on recovery post-pandemic. Our 15-16% lift in FY22-23 earnings mainly reflects P2’s improved performance. We expect P2 to register higher vehicle sales of 233k units (+22% YoY) in FY22. P2 targets to sell 6k units/ mth for its face-lifted MyVi model (launched in 4Q21) and will continue to bank on Ativa (1Q21) and the refreshed Aruz (2Q21) to spur sales. It is also taking initiatives to transition into electrification through its yet-to-be launched hybrid EVs (HEVs). All in, we see upside to our earnings, for our P2 forecast is 6% below its 247.8k unit target.
Undemanding valuations, attractive dividend appeal
We like MBM for its 3-tier exposure as a: (i) shareholder; (ii) dealer; and (iii) supplier of auto parts to P2. It is cash-rich and offers a decent dividend yield and undemanding valuations. Our DPS estimates offer attractive dividend yield of 7%, based on 44% DPR. Matching the DPR to FY21’s 47% would offer investors a higher dividend yield appeal of 8-9%.