KUALA LUMPUR (June 21): Analysts have upgraded their calls on Bermaz Auto Bhd (BAuto), while raising their target prices (TPs) for the counter.

In a note, Hong Leong Investment Bank (HLIB) Research analyst Daniel Wong upgraded BAuto to a “buy” call from “hold” and raised his TP for the auto company to RM1.75, from RM1.40, after rolling forward its estimated calendar year 2022 (CY22) price-earnings ratio (PER) of 13 times.

“BAuto has been building up a healthy balance sheet position with net cash of RM455.6 million (39.2 sen per share) as of end-FY21 (the financial year ended April 30, 2021),” he remarked.

The research team of PublicInvest Research upgraded BAuto to an “outperform” call, while also raising their TP for the counter to RM1.78 from RM1.46 previously. They believe the company’s longer-term growth prospects will be supported by the introduction of new model launches under the Kia and Peugeot marques.

Both research houses stated that BAuto’s net profit for FY21 came in above their expectations.

The company reported fourth quarter ended April 30, 2021 (4QFY21) core profit after tax and minority interests (PATMI) of RM64.4 million (+91.9% quarter-on-quarter [q-o-q]; +831.7% year-on-year [y-o-y]), boosting its FY21 sum to RM130.8 million (+23.1% y-o-y), which Wong noted was above HLIB’s FY21 forecast (127.3%) and the consensus (136.5%).

PublicInvest Research, meanwhile, said BAuto’s core net profit for full FY21 of RM135.5 million (+30% y-o-y) was above its and consensus expectations, accounting for 154% and 139% of the respective full-year estimates.

HLIB’s Wong, on the other hand, viewed that despite the implementation of the full movement control order (FMCO) in June, BAuto’s Malaysian operations are expected to remain favourable by leveraging the sales and service tax (SST) exemption placed until end-December 2021.

On the other hand, its Philippine operations' near-term outlook remains challenging due to the ongoing general community quarantine (GCQ) to control the outbreak of Covid-19 in the country, he added. 

“The commencement of vaccination programmes in Malaysia and the Philippines may improve market sentiment towards end-CY21. Management guided for a cautious outlook for FY22 due to the unpredictable course of Covid-19. Attractive new launches for Mazda, Kia and Peugeot are under discussion. However, actual launches have been guided to be dependent on market sentiment and economic conditions,” he viewed.

The PublicInvest Research team also shared the view that BAuto’s operations in the Philippines are expected to continue to be impacted by a weaker market amid Covid-19, but the local research house added that it understands that this will be mitigated by its minimal operating overhead.

“Note that BAuto recently acquired an additional 35% stake in Berjaya Auto Alliance (BAASB) from Berjaya Corp Bhd for a cash consideration of RM4.6 million, [with the] stake increasing from 20% to 55% and [it] becoming a subsidiary of the group effective June 8, 2021. Its contribution remains immaterial for the quarter,” the team highlighted.

Shares in BAuto were up 2.7% or four sen higher at RM1.52 at the time of writing today, valuing it at RM1.77 billion, with 1.24 million shares done.