PETALING JAYA: More special dividends may be on the cards for the shareholders of MBM Resources Bhd, which recently surprised the market with a 15-sen special dividend.
MBM, a proxy for Perodua’s potential blockbuster year – given its 22.58% stake in the carmaker – could see more strong earnings in the current 2023 financial year (FY23)
“Should FY23 perform as per our expectations, we think more special dividends could be on the table,” according to RHB Research analyst Jim Lim Khai Xhiang.
MBM announced a total special dividend of 25 sen for FY22, on top of total interim dividends of 12 sen.
Lim remained bullish on the stock, partly for its attractive FY23 dividend yield, estimated at 9.5%.
“We maintain our FY23 and FY24 earnings, as we had previously accounted for softer FY23 Perodua margins, due to the carmaker’s absorption of high input costs.
“We introduce FY25 earnings, implying a 20% year-on-year (y-o-y) decline, premised on the potential implementation of the excise duty reform in 2025, which would be negative for car sales,” stated Lim in a note yesterday.The analyst said Perodua is targeting to sell 314,000 units of cars this year, as compared to 282,000 units in 2022.
Perodua’s potentially strong volumes could drive MBM’s earnings in FY23.
“In recent years, MBM’s associate contribution (which mostly comprises of Perodua) has made up between 60% and 73% of profit before tax (PBT).
“Due to our expectations of a strong performance from Perodua, we estimate the associate contribution will be at 75% of PBT in FY23,” said Lim.
RHB Research has fixed a target price of RM5 per share for MBM, with a “buy” call.
Hong Leong Investment Bank (HLIB) Research also has a target price of RM5 and a “buy” call on the stock.
Daniel Wong of HLIB Research expects MBM to continue leveraging on the strong Perodua momentum in 2023, mainly driven by the high order backlogs and strong demand for its newly launched Axia model.
“The group is also expected to benefit from the recent appreciation of ringgit against the US dollar.
“Management will continue to manage its cost through process improvement and cost rationalisation exercise to remain competitive,” he said.
Wong also said that MBM’s results for the recently announced FY22 was within expectations.
The group reported a new record-high core net profit of RM238.4mil for FY22, which surged by 60.9% y-o-y.
Wong kept his forecasts for MBM unchanged and said that MBM offers attractive dividend yields of 6.6% to 7.4% for FY23 and FY24.
MIDF Research analyst Hafriz Hezry, however, revised up MBM’s earnings forecast for FY23 by 8.5% on stronger outlook for Perodua.
He also raised the target price by 10 sen to RM4.70 per share.
“Our revised FY23 Perodua total industry volume of 296,000 units (up 5% y-o-y) marks another record high but is still more conservative than Perodua management’s internal target of 314,000 units (up 11% y-o-y).
“Our FY23 net profit implies a 4% y-o-y growth to another year of record earnings driven mainly by higher Perodua earnings and a normalised effective tax rate post-Cukai Makmur.
“We introduce our FY24 earnings, which at this point, implies flattish growth against the record FY23 base,” added Hafriz.