Bermaz Auto Bhd
(Sept 17, RM2.36)
Maintain buy with an unchanged target price of RM2.86: Bermaz Auto Bhd’s (BAuto) results for the first quarter ended July 31, 2020 (1QFY20) were within expectations. Its core net profit (CNP) increased 3.1% year-on-year (y-o-y) to RM51.8 million — 20% and 21% of our and consensus full-year estimates. We expect stronger results for the coming quarters, supported by new model launches.
Its revenue increased 10.2% y-o-y to RM535 million, attributable to a higher sales volume and a better sales mix for Malaysian operations. Stronger sales in Malaysia resulted in higher revenue and better associates’ contributions, more than offsetting a lower contribution from the Philippine operations.
The commendable CNP was mainly driven by a robust sales volume in Malaysia as the group offered promotions to clear existing Mazda CX-5 inventories, preparing for the upcoming facelift model expected to be launched in September, higher contributions from Mazda Malaysia due to an increase in Mazda CX-5 production volume in the local market, and a lower tax rate.
Its earnings before interest and taxes margin for 1QFY20 decreased to 10.5%, versus 12.6% for 1QFY19, as a result of more sales incentives given to clear Mazda CX-5 inventories. Meanwhile, the tax rate reduced to 20.9% from 23.3% last year. The total 1QFY20 sales volume remained relatively flat at 3,787 units — with Malaysia recording 3,260 units, and the Philippines 527 units.
The sales volume in the Philippines declined 34.1% y-o-y as there were no units sold for Mazda3 and Mazda CX-3 models during the quarter under review as buyers waited for the new and facelift models of Mazda CX-3.
The group’s board has declared a higher first interim dividend of 3.25 sen for the quarter under review, versus 2.5 sen for 1QFY19. There are no changes to our earnings forecasts.
The expected launch of the all-new Mazda CX-8, CX-30 and the facelift model of CX-5, including the 2.5L Turbo variant in Malaysia, in the second half will drive growth in the financial year ending April 30, 2020 (FY20). We expect a lukewarm market outlook for the Philippines due to an increase in car excise duties. However, we believe demand for automotive vehicles will gradually improve and sales to increase accordingly.
We believe the group will still pay generous dividends, underpinned by subdued capital expenditure requirements and a large cash pile of about RM238 million. — TA Securities, Sept 17