MBMR: OSK target price RM5.00

This is quoted from OSK Research released today:

"MBM Resources’ FY10 core net profit of RM141.6m was in line with our estimates. Core earnings growth surged 133.5% y-o-y driven by a topline growth of 40.4% y-o-y. With its associates’ profits doubling, the significant improvement in earnings was also boosted by healthy margins on the back of higher volume and efficiency achieved amid the strengthening Ringgit. A special dividend of 3 sen was announced, with full year dividend amounting to 13 sen a share, for a net yield of 4%. Maintain BUY at TP of RM5.00."

MBMR: 5 reasons NOT TO MISS THIS STOCK

MBM Resources Berhad or MBMR owns 20% of PERODUA and 71.5% of Daihatsu (M) Sdn Bhd. Besides motor segment, the Company also involves in Manufacturing and Property segments as shown in the Group Structure below:

To make it simple, let's have a glance at top 5 reasons why you SHOULD NOT MISS THIS STOCK:

NO 1: Attractive Valuation
At RM3.34, the stock is trading at forward PER of 5.9x only, as compared to APM 9.3x and PROTON 9.8x


NO 2: Earnings improving, FY2010 earnings poised to be the highest ever in history
For 9 months 2010 or 9MYTD, MBMR accumulated net income is RM112.78m. Considering that Quarter 4 is normally weaker, let say MBMR made only RM25m in the last quarter. If that comes true, MBMR will be achieving its highest ever net income since incorporation. Imagine the share price reaction when the earnings are reported in newspaper and by other research house.


NO 3: Still significantly below book value of RM4.03

At RM3.34, the market is giving discount of 17.1% to the Company's Book Value. Think it again, 20% ownership of Perodua and 71.5% ownership of Daihatsu Malaysia. Does it make sense for the discount? I myself think that the discount should narrow to 5%, which means MBMR has potential to go up to RM3.83.


NO 4: From technical view, still NOT OVERBOUGHT

At RM3.34, the Relative Strength Indicator or RSI reading is 59.1, which means it is still at NEUTRAL state. Still some way to go before MBMR RSI cross 70 level, which then it will be considered Overbought.


NO 5: Average analyst target price is RM4.56
There are 11 analysts covering MBMR, 10 calling BUY, 1 HOLD. The average target price is RM4.56, representing upside of 36.5% from current market price of RM3.34.



Possible bonus issue?
MBMR balance sheet has the strength to do so. The market price has surpassed RM3.00 which may cause less retailers participation. All these indicators suggest that it is possible for MBMR to do bonus issue, 1 to 1 is not a major problem...