MBM Resources Berhad (MBMR) and DRB-HICOM (DRB) are both stocks that I like. Let’s have a look at both their P/Es and M/B. They both seem very interesting.
DRB has principal activities in automotive, services, and property & infrastructure, below are its automotive investments:
HONDA Malaysia Sdn Bhd. 34%
ISUZU Malaysia Sdn Bhd.49%
SUZUKI Malaysia Automobile Sdn Bhd. 40%
EUROMOBIL Sdn Bhd. 79.05% (distributor of AUDI cars)
MITSUBISHI Motors Malaysia 37.94%
Edaran Otomobil Nasional Berhad 79.05% (EON); (Marketing of Proton Vehicles, spare parts and servicing)
USF-HICOM 100 % - Selling 4WDs and MPVs
Motorcycles: Modenas (70%), Honda (48%), Yamaha (45%) & Suzuki (29%).
DRB is also first assembler of Mercedes S Class outside of Germany
Growth prospect: Just tied up with Volkswagen to assembly 40,000 – 50,000 cars annually in Pekan at a cost share basis of DRB 70% Volkswagen 30%. Assembly for 1.8l Passat will begin as soon as this November.
MBMR has principal activities in manufacturing, leisure and motor trading. Below are its automotive investments:
Daihatsu Malaysia Sdn Bhd 71.5%
Federal Auto Holdings Berhad 86% (distributor of Volvo, Volkswagen, Mitsubishi & FAST cars)
Hino Motors Sdn Bhd 42% (commercial vehicles)
Perodua 20% (excluding another 5% held through Daihatsu Malaysia Sdn Bhd)
UMW – Assembly and distribute Toyota vehicles. Corporate website explains UMW:
UMW is a leading industrial enterprise with diverse and global interests in the automotive, equipment, manufacturing and engineering, and oil and gas industries. The UMW Group has expanded beyond Malaysian shores; we now also have an international presence in Singapore, Indonesia, Thailand, Myanmar, Vietnam, Papua New Guinea, Australia, Taiwan, China, India, the United Arab Emirates and Turkmenistan.
UMW also owns 38% of Perodua
Franchise holder and exclusive distributor of Nissan passenger and lightweight commercial vehicles and Renault in Malaysia. Tchong has two assembly plants in Malaysia with combined capacity of producing 31,000 units. In December 2009, Tchong obtained an Investment Certificate from Danang Industrial and Export Processing Zones Authority, Vietnam to undertake the manufacturing, assembly and sale of buses, trucks and passenger cars, provision of after-sales services and sale of spare parts. Tchong also has sole and exclusive rights to distribute Nissan brand completely built-up (CBU) vehicles in Cambodia and Laos.
Referring to bottom table, Tchong and UMW have high PEs in the industry probably attributing to the fact that they have strong growth opportunities overseas (esp. for Tchong in emerging markets).
DRBHICOM looks set to be a growth story with its Volkswagen foray, with its PE trading below Tchong and UMW. I like to compare DRBHICOM to only Tchong and UMW because Volkswagen/ Nissan/ Toyota are more comparable as a group since they all make reliable and high quality cars.
Tchong | EPS (cent) | 0.2722 |
14-Feb Price ($) | 5.01 | |
PE | 18.40558 | |
NTA ($) | 2.5 | |
M/B | 2.004 |
UMW | EPS (cent) | 0.4355 |
14-Feb Price ($) | 7.22 | |
PE | 16.57865 | |
NTA ($) | 3.59 | |
M/B | 2.011142 |
DRBHICOM | EPS (cent) | 0.15 |
14-Feb Price ($) | 2.05 | |
PE | 13.66667 | |
NTA ($) | 2.5 | |
M/B | 0.82 |
DRB may be still a mixed bag of assets a little bit like Sime Darby (a conglomerate having automotive investments as well). This could explain why its potential full value has not been unlocked thus its share price is still trading below book value and its PE trading far below UMW and Tchong. This is why there were rumours on 9 Dec 2010 that its controlling shareholder Tan Sri Syed Mokhtar Al Bukhary would like to privatise this conglomerate; obviously with the possibility of reshuffling its DRB’s business and relisting them in different units.
MBMR on the other hand appears to be a significantly undervalued company with a strong balance sheet, low debt (long term borrowings of RM14.5m for qtr ending 30/9/2010 against total assets of RM1.3b) and healthy cash flows. Its low PE may explain its nature as an investment holding company within a stable environment. However, I strongly believe there is plenty of room for its share price to appreciate.
Growth prospect: Perodua is looking to launch a new model very soon, one with an engine slightly larger than the Myvi and with other technological advancements simultaneously maintaining a competitive price.
MBMR | EPS (cent) | 0.4666 |
14-Feb Price ($) | 3.2 | |
PE | 6.858123 | |
NTA ($) | 4.08 | |
M/B | 0.784314 |
Proton: The story for Proton trading WAY below its book value is because it is simply Proton. I guess anyone here would just understand. Proton has long been a laggard in the car industry and produces cars that are obviously less reliable than its peers Volkswagen/ Nissan and Toyota which has a lot of history. The only reason for it still surviving is all the protectionism given to it. It deserves to be undervalued; it is also trading at very high P/Es, after recovering from financial losses in recent years. Its growth strategies (investing heavily in LOTUS, sponsoring F1 & still unsuccessful in finding a foreign partner) also do not seem promising at this point in time.
Proton | EPS (cent) | 0.154 |
14-Feb Price ($) | 4.32 | |
PE | 28.05195 | |
NTA ($) | 9.85 | |
M/B | 0.438579 |
