Monday, May 14, 2012

MBMR ... May12

The recent (early May 2012) price surge does not reflect the company’s fundamentals. The sharp spike comes on the back of the company’s announcement of a bonus issue and rights issue and warrants.

The rally is fuelled by speculation that MBM will expand its business to include automotive assembly in the near future. The group acquired Kinabalu Motor Assembly Sdn Bhd from Lion Corp in 2011 which came with assembly license for automobiles. The company can could be holding off plans to finalize a tie up with a foreign auto player until the government announces the NAP, which is expected before June 2012. The potential suitors of MBM will need to evaluate the government’s blueprint for the auto sector.

The group plans to start assembling cars in small volume first for domestic market before expanding for exports. But industry observers said the company may have to consider alternative strategies because Malaysia ’s domestic market is already matured and saturing.

MBM Resources’ automotive parts manufacturing business has a big potential. This is because the group is the only airbag manufacturer in Malaysia through Hiro. The sales of airbags are set to increase with the government making it mandatory that all new passenger cars must be equipped with the vehicle safety device.

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