KUALA LUMPUR (June 12): Shares in Bermaz Auto Bhd (BAuto) slumped as much as 8.02% or 13 sen to RM1.49 in mid-morning trade today, after the group posted its weakest-ever quarterly and annual results since it was listed in 2013.

At 9.45am, shares in BAuto fell 4.32% or seven sen to RM1.55, valuing the group at RM1.88 billion. It saw some 928,700 shares traded.

In a note today, Affin Hwang Capital Research's Brian Yeoh said the group's 4QFY20 (fourth quarter ended April 30, 2020) core earnings fell by 73% quarter-on-quarter (q-o-q) to RM7 million on lower revenue, weaker earnings before interest, taxes, depreciation and amortisation (EBITDA) margins as well as lower contributions from associates.

Meanwhile, he said, the revenue of RM299 million (-36% q-o-q), its lowest quarterly revenue since 2QFY14, was due to the temporary closure of businesses by the Malaysian and the Philippine governments.

"The lower sales volume, coupled with the production halt in the Inokom plant, saw its contributions from associates fall by 67% q-o-q. EBITDA margins were also compressed by 3.1 perecentage points to 2.6%, in tandem with the lower revenue and higher operating cost incurred during the lockdowns, in our view," he said.

Yeoh said the slump in the 4QFY20 results saw BAuto's FY20 core net earnings decline by 61% year-on-year to RM106 million.

"Bauto's 2QFY20 and 3QFY20 revenues or margins were also a culprit for the FY20 decline, as the results were constrained by the delay in car pricing approvals for the flagship models: the facelifted CX5 and the all-new CX-8 models.

"Overall, the results were below street's and our expectations — accounting for 91% and 92% of respective full-year forecasts. The disappointment was mainly due to lower-than-expected EBITDA margins," he noted.

Despite the disappointing results, he maintains his "buy" rating and 12-month target price of RM2.38 based on an unchanged 15 times CY21E earnings per share.

"We keep our earnings estimates largely unchanged, pending further updates from the management.

"At 11 times FY21E PER (price-earnings ratio), valuations look compelling," he added.

Meanwhile, Yeoh said he believes the worst is over for BAuto, considering the lockdown easing and cheaper car prices on tax incentives, which should lift Mazda car sales volume moving forward.

Yeoh also listed the key risks to his call on the group, which included lower-than-expected car sales volume, supply constraints on Mazda models and foreign exchange risk.