MBMR ... Mar12

Concerns that its EPS will be diluted after it proposed a renounceable rights issue of 73.65 million. Given the group’s aggressive expansion, it has proposed a rights issue with warrants to fund its plans, as well as a bonus issue to reward shareholders and boost liquidity in its stock.

To recap, it is shoring up cash to expand into the auto assembly business, for which it already has a license. It have already acquired a license and are in negotiations with several brands which are interested in partnering with it to assemble cars in Malaysia . With this particular license, it is attractive to go for passenger vehicles priced under rm150000. It is exploring both options – commercial and passenger vehicles. It will be targeting the middle to upper segment of vehicles.

To fund the expansion, it proposed rights issue with warrants. The group currently has rm247 million in cash as at 4QFY2011 ended Dec 31. The group which has been net cash for the most part, posted net borrowings of rm180 million and net gearing of 10% following subsidiary OMI rm103 million investment in alloy wheel manufacturing plant in mid Jan 2012.

The company hopes to get shareholder approval in early May 2012 and complete the fund raising exercise by June 2012. The group currently has rm247 million in cash on its books as at Dec 31, 2011.

Historically, it has been a dividend yield stock, its gearing has been low and its earnings derived primarily from associate companies like Perodua. This is going to change. For the next three years, until its investments mature, they are going to be a growth stock and expect its shareholders to be rewarded with capital appreciation as the market begins to recognize its potential.

Med Bumikar Mara holds 53.91% equity and the EPF owns a 6.88% stake,

The group which has been a net cash position for the most part, posted net borrowings of rm180 million and net gearing of 10% following subsidiary OMI’s rm103 million investment in an alloy wheel manufacturing plant in mid Jan 2012.

The biggest risk to MBMR’s plans would be an unforeseen change in policy.

MBMR’s portfolio of auto businesses includes distribution of vehicles, post sales servicing, retail of parts and accessories and manufacturing auto parts.

It also plans to expand the group’s vehicle parts manufacturing business. It had acquired Hito and OMI’s plant by year end (2012).

It also has various properties on freehold land in prime areas.