KUALA LUMPUR (Dec 10): CGS-CIMB Research has maintained its “Add” rating on Bermaz Auto Bhd at RM2.10 with a lower target price of RM2.60 (from RM3.10) and said Bermaz is set to release its 2QFY4/20F quarterly results today (Dec 10).
In a note Dec 9, the research house said it estimates Bermaz’s earnings delivery was sequentially weaker in 2QFY4/20 due to a lower number of registered vehicles recorded in Aug-Oct 2019, down 15% quarter-on-quarter (q-o-q).
“While the group was impacted by weak overall industry demand, the lower sales delivery was exacerbated by the delay in obtaining pricing approval from the government for its new CX-5 facelift and CX-8 models.
“We understand the group only received pricing approval between end-Oct and mid-Nov for both models, which led to delays in sales delivery.
“This is nearly 1-1.5 months after the official launch for both models. Overall, we expect Bermaz to register a q-o-q decline of almost 30-40% in 2QFY20 EPS,” it said.
CGS-CIMB Research said it expects Bermaz’s earnings to improve in 2HFY4/20F onwards, driven by higher sales from new models and export potential for CX-5 and CX-8 SUV.
“Bermaz is our top pick for being an attractive proxy for rising SUV demand, its export market potential via 30%-owned Mazda Malaysia Sdn Bhd and attractive CY20F yield of 8.4%,” it said.