KUALA LUMPUR (Dec 11): CIMB Investment Bank Bhd expects Berjaya Auto Bhd (BAuto) to register stronger performance in the second half of its financial year ending April 30, 2016 (2HFY16), helped by new Mazda car models.

In a note today, CIMB analyst Azman Hussin said the research house expected new models to drive BAuto's sales growth. Azman noted that the recently-launched crossover CX-3 received very positive response with some 600 bookings placed before the launch.

"Other new models in the line-up are the Mazda CX-5 facelift (Jan 2016), Mazda 2 diesel (Feb 2016), Mazda 6 diesel (Feb 2016), CX-5 diesel (Feb 2016) Mazda 6 CKD (Jun 2016), and possibly, the CX-3 CKD by end-2016.

"We believe that BAuto's decision to keep its car prices stable year-on-year in 2016 is highly positive for its earnings outlook in 2016. We believe that BAuto would be able to do this, as it has zero cost exposure to the US dollar (its CBU models are denominated in yen, while its CKD models are assembled by its associate Mazda Malaysia Sdn Bhd)," he said.

CBU stands for complete built up models, while CKD refers to complete knock down entities, which are assembled here.

Azman said CIMB expected Mazda to gain market share in anticipation that competitors will raise car prices next year. CIMB's note followed the announcement of BAuto's 2QFY16 financials yesterday.

Yesterday, BAuto reported lower 2QFY16 net profit at RM53.06 million versus RM57.52 million a year earlier. 1HFY16 net profit fell to RM105.27 million from RM113.62 million.

Today, Azman said BAuto's 1HFY16 results were broadly in line with expectations. He said the company's core net profit was down 7.4% at RM105.3 million.

"1H16 core net profit made up 47% of our full-year forecast and 50% of consensus. We consider this broadly in line, as we expect a stronger 2HFY16," the analyst said.

CIMB maintained its "add" call for BAuto shares with a target price (TP) of RM3.04.

"BAuto is our top pick for Malaysian autos. Successful new model launches and sustained sales growth are potential re-rating catalysts," Azman said.

At 11.52am, BAuto shares fell one sen or 0.5% to RM2.11, giving the company a market capitalisation of RM2.41 billion.

Meanwhile, MIDF Amanah Investment Bank Bhd trimmed its earnings forecast for BAuto by 10% and 9% for FY16 and FY17 respectively after considering the strengthening yen, which translates to higher costs for BAuto.

This is because BAuto imports the Mazda models in yen.

In a note today, MIDF analyst Hafriz Hezry said the negative impact from foreign exchange would be partly offset by an increase in BAuto's FY16 and FY17 Mazda sales.

"We forecast volume growth of 17% for FY16 followed by a 4% growth in FY17," Hafriz said.

MIDF maintained its "buy" call on BAuto shares with a lower TP at RM2.60 versus RM3.30 previously.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)