KUALA LUMPUR: MBM Resources Bhd may continue to leverage on the strong automotive sales in the second half of 2021 given the high backlog of orderbook and on-going strong demand, according to Hong Leong Investment Bank Bhd (HLIB).
Its analyst Daniel Wong said this would be driven by the extended Sales and Services Tax (SST) exemption until December 31, which could potentially be extended further.
"MBM Resources expects a stronger second half of 2021. The management remained cautiously optimistic on the group's outlook with the recent relaxation of lockdown measures," he said in a report today.
Wong said the optimism was backed by strong carried-over orderbook and strong demand with the SST exemption, while the automotive industry was approaching the government to further extend it to June 30 next year.
"The group will ramp up productions to meet the strong orderbook," he added.
MBM Resources has also benefited from the ongoing cost tightening measures and new marketing platforms in view of the changing consumer behaviour from the pandemic.
HLIB has maintained a "Buy" call for MBM Resources with an unchanged target price of RM4.80.
It said the company has attractive dividend yield of between 5.6 per cent and 7.7 per cent for the year ending December 31, 2021 to 2023.
"MBM Resources is currently in a net cash position (62.9 sen per share) with continued earnings and cash flow growth, by leveraging onto the strong demand for Perodua models," it added.
MBM Resources returned to the black with a net profit of RM16.63 million for the second quarter (2Q) ended June 30, 2021, from a net loss of RM5.19 million previously, due to extended SST exemption and ongoing cost-cutting measures.
Its Q2 revenue increased 24.1 per cent to RM320.88 million from RM258.6 million on the back of higher performance from both its motor trading and auto parts manufacturing divisions.