KUALA LUMPUR (Nov 26): Shares of MBM Resources Bhd (KL:MBMR) broke another new record high on Tuesday, as the company declared a special dividend following better-than-expected results.

MBM Resources climbed as much as 18 sen or nearly 3% to RM6.54. The stock paused for the midday break at RM6.44, valuing the automotive dealer and parts maker at RM2.5 billion. Trading volume totalled 645,900 shares so far.

Core net profit for the cumulative nine months ended Sept 30, 2024 (9MFY2024) accounted for 81% of the consensus full-year estimate, though the majority of analysts were still cautious over further upside to the stock following the recent rally.   

“We remain cautious due to several macroeconomic challenges,” BIMB Securities said, flagging a potential increase in the goods value tax that may raise the cost of vehicles as well as targeted subsidy rationalisation and rising living costs, which could drag on purchasing power and sentiment.

Shares of MBM Resources have rallied nearly 55% so far this year, thanks to record car sales in the industry. New vehicle sales could potentially break last year’s record high and hit 800,000 units this year driven by robust demand for national cars, according to the Malaysian Automotive Association.

The company serves Perodua, the country’s biggest carmaker by volume, and manufactures seat belts, airbags, and steering wheels. The company also has an associate assembling Hino-branded vehicles.

A majority of seven out of 11 research houses covering MBM however have a ‘hold’ call on the stock, and one has a ‘sell’ rating, and only three recommend ‘buy’. The consensus 12-month target price is RM6.27, according to Bloomberg, about 3% below its last price.

“We believe the strong performance of Perodua is already priced in” following the recent rally, said MIDF Amanah Investment Bank.

In addition to the planned tax increase, competition is also intensifying with numerous new model launches in the pipeline as well as the entry of Chinese brands, particularly in the electric vehicle market.

“This fierce competition has already triggered a price war,” said TA Securities, which has MBM Resources on a ‘sell’ call.

On Monday, MBM Resources declared a special dividend of 22 sen per share, even as net profit for the third quarter ended Sept 30, 2024 (3QFY2024) was down 17% year-on-year to RM87.38 million. The company booked a RM28.4 million gain from the sale of a property, which inflated its 3QFY2023 results.