This article first appeared in The Edge Malaysia Weekly on October 2, 2023 - October 8, 2023

MAJLIS Amanah Rakyat (Mara), the single largest shareholder of Med-Bumikar Mara Sdn Bhd, is  said to be looking to exit its investment in the privately held vehicle, which has an indirect stake in Perusahaan Otomobil Kedua Sdn Bhd (Perodua).

Sources say Mara is already in talks with investment bankers on the sale of its 29.18% stake in Med-Bumikar. The other shareholders of Med-Bumikar are also said to be open to exploring a sale of their stakes.

However, when contacted by The Edge, Mara says it has no plans to divest its stake in Med-Bumikar for the time being. “At the moment, Mara has no plans to sell its shareholding in Med-Bumikar,” says a Mara representative.

Apart from Mara, the other shareholders of Med-Bumikar comprise six families who collectively control about 70% of the company through their private vehicles.

Med-Bumikar has more than 50% equity interest in Bursa Malaysia-listed MBM Resources Bhd (MBMR), which in turn holds a 20% stake in Perodua. MBMR’s market capitalisation has reached RM1.47 billion on account of the strong performance of Perodua, which is the market leader in the passenger car segment of the domestic automotive industry.

As at end-June, Perodua commanded almost 40% of the total industry volume (TIV) of 144,690 vehicles. In the passenger car segment, it captured more than half of the market. The company has set an ambitious target of 314,000 vehicles this year, representing an increase of 11.3% from 282,019 deliveries last year.

The shareholding structure at Med-Bumikar is intricate. Under an early agreement, Mara has the first right of refusal to take up the shareholding of any shareholders who decide to exit Med-Bumikar.

“Previously, Mara was keen to increase its stake in Med-Bumikar. But now, the approach has changed due to the changing landscape of the automotive industry. If Mara sells its stake, the other shareholders may follow suit,” says an industry observer.

Perodua chalked up a profit of almost RM750 million on a turnover of RM15.2 billion for the financial year ended Dec 31, 2022. Based on a price-earnings ratio (PER) of 10 times, the company should be worth RM7.5 billion.

Hence, MBMR’s 20% stake in Perodua is effectively valued at about RM1.5 billion. MBMR, the largest distributor of Perodua cars, also has an auto parts manufacturing and distribution business.

“A listing of Perodua will unlock value for MBMR. But MBMR is not in control of any decision pertaining to the listing of Perodua. It is more in the hands of PNB (Permodalan Nasional Bhd) and the Japanese partner in Perodua,” says an investment banker.

Perodua is a joint venture between Malaysian and Japanese entities, with no single party holding a controlling stake.

Through wholly-owned UMW Corp Sdn Bhd, UMW Holdings Bhd owns 38% of Perodua, while Daihatsu Motor Co and its Malaysian outfit have a 25% stake. MBM also has an indirect stake of 2.8% in Perodua while PNB, the parent company of UMW Holdings, has a direct stake of 10% in Perodua.

It is worth noting that MBMR CEO Muhammad Fateh Teh Abdullah resigned on Aug 24, the day PNB announced it was disposing of its 61.2% stake in UMW Holdings to Sime Darby Bhd, leading to a merger of the two entities. In a filing with Bursa Malaysia, MBMR said the departure of Muhammad Fateh, 53, was because he wanted “to pursue other interests”.

Subsequently, the company announced the establishment of an executive committee (exco) to assume the role and responsibilities of the group CEO until a new CEO is appointed. The exco comprises the company’s non-independent executive directors, namely Datuk Zulfikri Osman and Low Hin Choong, both of whom are shareholders of Med-Bumikar.

Zulfikri is currently deputy director-general of Mara and a director of Med-Bumikar. Low is one of the shareholders of Med-Bumikar via Rosen Sdn Bhd, which has an 11.75% stake in the company. He is also a director of Perodua.

The formation of the exco could spark potential shareholding changes in MBMR following the proposed merger between Sime Darby and UMW Holdings.

This is not the first time Med-Bumikar’s controlling stake in MBMR is an acquisition target. In 2018, UMW Holdings offered to buy its 50.07% stake in MBMR in a bid to tighten its grip on Perodua. The proposal effectively valued MBMR at RM2.56 per share, or a 16.9% premium to the last traded price of RM2.19 before the announcement, but still below its net assets per share of RM3.70 as at Dec 31, 2017.

The deal fell through after a disagreement between the shareholders of Med-Bumikar on the sale, as the majority deemed the offer too low. In addition, it is learnt that Daihatsu Motor opposed the proposal as it would have meant UMW Holdings and PNB having more than 50% equity interest in Perodua.

“When Perodua was set up, the shareholding was broken up so that no one single entity had more than a 50% stake in the car manufacturer. It was one of the conditions of the Japanese partner,” says another source.

At RM3.77 per share at the time of writing, MBMR was trading at a forward PER of 5.78 times, a far cry from those of its automotive peers such as Sime Darby (12.63 times), UMW Holdings (12.17 times) and Bermaz Auto Bhd (9.46 times). MBMR’s share price was also far below its net assets per share of RM5.32 as at June 30, 2023.

A cursory glance at Med-Bumikar’s financial results reveals that the private entity posted a commendable growth in earnings, having achieved a compound annual growth rate of 11% to a profit before tax of RM328.82 million in FY2022 from RM189 million in FY2018. The group rewarded its shareholders with a dividend payout of RM71.4 million for FY2022, more than seven times the RM11.2 million for FY2018, thanks to its crown jewel MBMR.

Analysts are bullish on MBMR’s earnings visibility owing to the order backlog of Perodua vehicles. According to Kenanga Research, the car maker has a backlog of 170,000 units and MBMR stands to benefit as it is the largest dealer of Perodua vehicles in Malaysia on top of its effective 22.58% stake in the company.

“The plants of Perodua Manufacturing and Perodua Global Manufacturing have a combined capacity of 320,000 units. It is currently operating two shifts, but there are plans to boost production by lifting productivity and increasing overtime. We are keeping our TIV assumption of 314,000 units and 320,000 units for FY2023 and FY2024 respectively,” it said in an Aug 28 report.

If shareholding changes take place in Med-Bumikar, it will be interesting to see whether it will eventually lead to a public listing of Perodua. 

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