Press Metal, Oceancash Pacific,Choo Bee Metal Industries,VisDynamics Holdings

STOCK FOCUS OF THE DAY

MBM Resources : Getting to the root of the problem             HOLD

We retain our HOLD rating on MBM Resources (MBM) with an unchanged FV of RM2.30 based on an FY18F PE of 9.5x — 3 notches below its three-year average historical forward PE of 12.9x. We believe that the group is taking measures to address the root problems in its alloy wheel business unit, which has been loss-making for years as production failed to reach the optimal level.

Our key takeaways from a meeting with management last week: (1) Low production volume is still the main culprit. The alloy wheel unit is currently utilising only 50% of total capacity (of 60K/month or 720k/year). It needs to be near the full utilisation level to break even. (2) MBM is repairing a broken foundation. The unit saw a massive rejection rate of 40% as a result of an inadequate infrastructure. We believe the catch-22 would be a jump in volume that could worsen the operational issues in its alloy wheel unit. We are positive that management is cognizant of this, and that it has placed a priority on getting things in order ahead of any major contracts. It will take a cautious approach towards the next expansion phase slated for this unit, which would raise its production capacity by 25% to 1mil units annually. At this stage, it is important for MBM to solve the fundamental issues in order to reach its long-term volume targets. 

Other :

Technology : Broadcom wireless revenue growth signals positives for Inari   NEUTRAL

QUICK TAKE

Plantation Sector : News flow for week 5 – 9 June            NEUTRAL                                                                                                                                                                                                                                                        

STOCKS ON RADAR

Press Metal, Oceancash Pacific,Choo Bee Metal Industries,VisDynamics Holdings

ECONOMIC HIGHLIGHT

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DISCLAIMER:

The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd. Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmBank Group Bhd and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice.