MBMR- net profit dropped on q-o-q basis

Results Update

For QE30/6/2012, MBMR's net profit dropped 28% q-o-q but rose 40% y-o-y to 29.5 million while revenue increased by 13% q-o-q or 61% y-o-y to RM614 million. The decline in the net profit on the q-o-q basis was due to a drop in contribution from the Automotive Component segment from RM23 million to RM13 million (with revenue from that segment dropped off slightly from RM101 million to RM96 million). The lower profit contribution could not be sufficiently made up by the  higher contribution from the Motor Vehicles segment of RM9 million (as compared to RM6 million previously) which is in turn due to higher revenue of RM516 million (as compared to RM441 million previously).


Table: MBMR's last 8 quarterly results

Despite the sharp rise in revenue in the past 3 quarters (due to the completion of the acquisition of Hirotako in 4Q2011), the group's bottom-line remained fairly stagnant. The reason is the continued slide in its profit margin since 1Q2010.


Chart 1: MBMR's last 25 quarterly results

Valuation

MBMR (closed at RM3.92 yesterday) is now trading at a PE of 8.3 times (based on last 4 quarters' gross EPS of 47 sen). MBMR could trade up to a PE of 10 times, if the market sentiment permits.

Technical Outlook

MBMR has surpassed its all-time high of RM3.20 recorded in 1997. A break above the all-time high is a bullish sign, which means that the stock could have further upside.


Chart 2: MBMR's monthly chart as at August 9, 2012 (Source: Tradesignum)

Conclusion

Despite the recent drop in the bottom-line, MBMR is still a good stock for long-term investment based on valuation & positive technical outlook.