PP 7767/09/2010(025354)

Malaysia
RHB Research
Corporate Highlights Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

R e su l ts N o t e
18 August 2010
MARKET DATELINE

MBM Resources Share Price

Fair Value
:
:
RM3.16
RM5.30
An even better 2Q Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (MBMR; Code: 5983) Bloomberg: MBM MK

Net Net
FYE Turnover profit EPS Growth PER C.EPS* P/NTA P/CF Gearing ROE GDY
Dec (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (x) (%) (%)
2009 1,187.2 68.3 28.2 (41.7) 11.4 0.9 18.2 Net Cash 7.7 2.8
2010f 1,404.9 110.9 45.8 62.3 7.0 45.0 0.8 16.8 Net Cash 11.4 3.7
2011f 1,488.8 116.8 48.2 5.3 6.7 48.8 0.7 15.0 Net Cash 11.0 3.7
2012f 1,618.7 122.7 50.3 5.0 6.3 59.0 0.7 11.8 Net Cash 10.6 3.7
Main Market Listing / Non-Trustee Stock / Syariah-Approved Stock By The SC * Consensus Based On IBES Estimates

RHBRI Vs. Consensus

♦ 1H10 results above both our expectations and consensus. Above
6MFY10 net profit of RM79.1m achieved 67.2% and 68.8% of both our In Line
and streets’ full year estimates, underpinned by the strong growth in all Below
models and the positive contribution from new dealerships with
Issued Capital (m shares) 242.4
Volkswagen, Mitsubishi and Hino.
Market Cap (RMm) 766.0
♦ Associate earnings main driver of yoy numbers. On a yoy basis, Daily Trading Vol (m shs) 0.1
2QFY10 net profit was up 204.5%, mainly due to associate earnings 52wk Price Range (RM) 2.10-3.26
contributed by Perodua (+32.6% yoy) and Hino (+91.2% yoy). Better Major Shareholders: (%)
margins (EBIT:+0.6ppts) from greater economies of scale, and lower Med-Bumikar MARA 54.0
import costs caused by sustained favourable exchange rates were also EPF 8.64
drivers of the better bottom-line earnings.
♦ Qoq performance sustained. On a qoq basis, increase from unit sales FYE Dec FY10 FY11 FY12
for Federal Auto (+44.4% qoq) and sales earnings for SVBW (+64.1% EPS chg (%) - - -
qoq) led revenue growth (+11.3%), while associate earnings (+12.5%) Var to Cons (%) 1.7 (1.3) (14.9)
were driven mainly by the resilient unit sales of Perodua (+1.1% qoq)
PE Band Chart
and strong units sales of Hino trucks (+46.9% qoq).
♦ Prospects. Going into 2H10, sales growth is guided to be still positive
PER = 9x
PER = 7x
albeit at a more moderate pace. This is in line with the outlook the PER = 5x

Malaysian Automotive Association (MAA) has for the whole industry.

They also revert that their plans to upgrade their existing network into
3S and expansion of their distribution and dealership with Volkswagon,
Hino and Mitsubishi are progressing as scheduled. Recall, we mentioned
that such exercises should cost them a total of RM100m capex
in 2010-12. Relative Performance To FBM KLCI
♦ Risks. 1) Lower car sales arising from an economic slowdown; and 2)
Weakening of RM against US$ and Yen. MBM Resources
♦ Forecasts. No changes to forecasts for now as although we are very
positive on earnings growth, we look to August’s TIV numbers (to be
released in September) to gauge if industry will actually undergo the
moderation guided for. We highlight that there is potential upside to FBM KLCI

our FY10-12 earnings estimates, should the sales volume growth prove
to be resilient in the coming months.
♦ Investment case. Forward earnings should remain positive on the
back of: 1) sustained favourable exchange rates; 2) improved
Joshua CY Ng
consumer sentiment and business conditions; and 3) strong
(603) 9280 2239
contribution from the new dealerships they have negotiated for. Given joshuang@rhb.com.my
the positive view we have on the stock, we maintain our indicative fair
value of RM5.30/share based on 11x FY11 EPS. Reiterate Outperform

Please read important disclosures at the end of this report.

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 18 August 2010

Table 2: Earnings Review

FYE Dec 2Q09 1Q10 1Q10 qoq yoy 6M09 6M10 yoy Comments
(RMm) (%) (%) (%)
Yoy, 2QFY12/10 revenue increased
(+42.1%) due to the recovery in sales
seen since 4QFY09.
Revenue 284.8 363.8 404.8 11.3 42.1 546.1 768.6 40.7
Qoq, revenue up due to increased unit
sales from Federal Auto (+44.4% qoq)
and SVBW (+64.1% qoq)
Yoy margins improved significantly as
costs of autoparts and CKD kits fall
EBIT 5.8 9.4 10.8 15.2 85.9 8.5 20.1 135.8
due to the strengthening of the ringgit
against the Yen and US$.
EBIT Margin
2.0 2.6 2.7 0.1 0.6 1.6 2.6 1.1
(%)
Int/ other inc 4.8 5.6 6.7 19.5 40.5 8.5 12.3 43.8

Interest exp (0.6) (0.3) (0.3) 19.1 (46.2) (1.1) (0.6) (47.2)
Yoy contribution from associate was
higher due to increase in unit sales of
Perodua (+32.6% yoy) and Hino
(+91.2% yoy).
Associate 11.1 30.6 34.4 12.5 210.7 17.2 65.0 278.2
Qoq, associate earnings were up
mainly on the resilient unit sales of
Perodua (+1.1% qoq) and strong units
sales of Hino trucks (+46.9% qoq)
EI 0.0 0.0 0.0 nm nm 0.0 0.0 nm
Pretax profit 21.1 45.3 51.6 13.9 144.8 33.2 96.9 191.7 Filtered down from EBIT

Pretax Margin
7.4 12.5 12.7 0.3 5.3 6.1 12.6 6.5
(%)
Taxation (4.4) (3.3) (4.6) 38.8 3.3 (5.8) (7.9) 35.7
MI (2.7) (5.4) (4.6) (15.7) 68.7 (4.1) (10.0) 142.6
Net profit 13.9 36.6 42.5 16.0 204.5 23.3 79.1 239.3 Filtered down from PBT.

Core Net Profit 13.9 36.6 42.5 16.0 204.5 23.3 79.1 239.3

Table 3: MBM unit vehicle sales

FYE Dec 2Q09 1Q10 2Q10 qoq yoy 3M09 3M10 yoy
(units) (%) (%) (%)
Daihatsu 889 912 866 (5.0) (2.6) 1,770 1,778 0.5
- Passenger 0 0 0 nm nm nm nm nm
- Commercial 889 912 866 (5.0) (2.6) 1,770 1,778 0.5

Hino 656 890 1,129 26.9 72.1 1,347 2,019 49.9

- Passenger 0 0 0 nm nm nm nm nm
- Commercial 656 890 1,129 26.9 72.1 1,347 2,019 49.9

Perodua 38,656 47,751 47,185 (1.2) 22.1 77,046 94,936 23.2

- Passenger 38,656 47,751 47,185 (1.2) 22.1 77,046 94,936 23.2
- Commercial 0 0 0 nm nm nm nm nm

Volvo 190 182 210 15.4 10.5 387 392 1.3

- Passenger 135 144 177 22.9 31.1 258 321 24.4
- Commercial 55 38 33 (13.2) (40.0) 129 71 (45.0)

Sub-total 40,391 49,735 49,390 (0.7) 22.3 80,550 99,125 23.1

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 Table 4. Earnings Forecasts Table 5. Forecast Assumptions
FYE Dec (RMm) FY09 FY10F FY11F FY12F FYE Dec FY10F FY11F FY12F

Turnover 1,187.2 1,404.9 1,488.8 1,618.7 Perodua TIV (k units) 195.4 196.8 202.3
Turnover growth (%) (1.3) 18.3 6.0 8.7 Daihatsu TIV (k units) 4.4 4.8 5.0
Hino TIV (k units) 3.1 3.2 3.2
Cost of Sales (1,076.0) (1,230.3) (1,291.1) (1,390.7) Volvo TIV (k units) 1.0 1.1 1.1
Gross Profit 111.2 174.6 197.7 228.0 Forex (RM:100JPY)* 3.63 3.59 3.59
* average rate
Depreciation (12.5) (20.0) (13.6) (15.0)
Net Interest 21.5 26.9 27.1 28.3
Associates 54.1 102.2 100.3 98.8

Pretax Profit 92.2 146.6 158.2 169.4

Tax (13.1) (23.2) (25.0) (26.8)
PAT 79.1 123.5 133.2 142.7
Minorities (10.8) (12.6) (16.4) (20.0)
Net Profit 68.3 110.9 116.8 122.7
Source: Company data, RHBRI estimates

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or
be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or
strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts
any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB
Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity
securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended
securities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

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