Friday, May 15, 2009

MBMR's downtrend still intact

MBMR has just announced its results for 1Q2009 ended 31/3/2009. Its net profit dropped by 44% q-o-q or 78% y-o-y to RM9.4 million while turnover declined by 3.1% q-o-q or 5.5% y-o-y to RM253 million. The sales volume in the trading division showed declines across the board compared to the same period last year, but the rate of decline has moderated. This coupled with the appreciation of the Yen against the Ringgit led to sharp decline in net profit. The manufacturing division continued to record growth, but its profitability was impact by higher raw material carried forward from last year.



MBMR (closed at RM2.26 yesterday) is now trading at a trailing PE of 6.5 times (based on last 4 quarters' EPS of 35 sen). If we assumed that MBMR's 2009 EPS is similar to the average performance for the last 2 quarters (i.e. 1Q2009 & 4Q2008), then MBMR's 2009 EPS would be about 22 sen. Based on this, MBMR would be trading at a current PE of 10.3 times- which is quite reasonable- leaving a small room for some upside for the stock.

Since peaking at RM3.62 in June & July 2007, MBMR's share price has been trending lower until it hit a low of RM1.91 in October 2008. The stock has yet to break above its downtrend line, with resistance at RM2.40. The stock also has a near horizontal support at RM2.00 level, which could be a good entry level for a long-term BUY. However, a sure bet would be to buy only after the stock has broken above the downtrend line at about RM2.40. This will probably happen only when MBMR's financial performance has shown clearer sign of recovery.


Chart: MBMR's weekly chart as at 14/5/2009 (Source: Quickcharts)

Based on the above, I believe MRMR deserves only a HOLD rating. You may choose to buy this stock near the RM2.00 level if you take a longer term view of this well-managed automotive group.
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3 comments:

  1. UnknownSaturday, May 16, 2009 2:00:00 PM

    Many traders seek to avoid downtrends because they can drastically affect the value of any investment. A downtrend can last for minutes, days, weeks, months or even years so identifying a downtrend early is very important. Once a downtrend has been established (series of lower peaks) a trader should be very cautious about entering into any new long positions.
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  2. Alex LuMonday, May 18, 2009 9:49:00 AM

    Hi Shameena,

    What you have said about downtrend is correct? However, given the improved outlook for equity generally as well as MBMR's strong management team & its position as a super-dealer for Perodua plus the good technical support for the share price at RM2.00-2.20 level, I would rate MRMR as a HOLD for now. I feel that MBMR may even be a BUY at RM2.00, if you take a long-term view.

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