STOCK FOCUS OF THE DAY
Bermaz Auto : Last days in the
trenches
BUY
We maintain BUY on Bermaz Auto (BAuto) with a fair value of
RM2.30 based on an unchanged FY18F PE of 13x. FY17 core net profit of RM116mil
was 7% below our estimate and 10% below consensus. The result, a 40% decline
YoY, was due to weakness in Malaysia where Mazda sales fell 35% YoY and its
operating margin declined 4ppts to 9%. Malaysia sales were lower as peers
offered various incentives and discounts while Mazda held its strategy to sell
at full prices. Notable declines were seen in the M2 and M3 (down 44% and 57%
respectively). The top 3 models for Malaysia remained the CX-5, M2 and M3
(accounting for 43%, 19% and 16% of Mazda TIV respectively).
In 4QFY17, core net profit tumbled 54% due to weak Malaysia
performance too (sales fell 37% YoY, operating margin halved to 6%). The group
said the margin contraction was partly due to the push to sell existing CX-5
ahead of the new version coming in the final quarter of this year. The group
declared a fourth dividend of 3.15 sen/share, bringing the total payout for
FY17 to 11.65sen or 91% of EPS (vs. FY16: 16.90 sen, 97%). We reiterate that
FY18 will likely see an improvement on the following: (1) better sales,
counting on the new CX-5 CKD (September), CX-9 facelift(July) and the various
models that came in April (MX-5 RF, M3, M6, CX-3); (2) margin recovery
following the recent price revision, and the introduction of new models at a
price premium; (3) a rise in associate earnings, following the ramp-up in
production and the addition of CX-5 exports to Southeast Asia (ex-Vietnam) from
August this year.
Others :
V.S.Industry : Great execution and earnings
delivery BUY
UMW Oil & Gas Corp : Pricing ahead of massive
rights HOLD
Gent Malaysia : Uncertainties in UK may affect
earnings SELL
Plantation Sector : Inventory down 2.6% MoM in
May NEUTRAL
STOCKS ON RADAR
Astino, Eversendai Corporation,Poh Huat Resources
Hldgs,Kimlun Corporation
ECONOMIC HIGHLIGHT
US : How far will the Fed go before ending its tightening
rate cycle?
NEWS HIGHLIGHTS
Vivocom : Vivocom secures RM195.2mil deal to build PPA1M
units in Perak
FGV : FGV power tussle escalates
Barakah Offshore : Barakah Offshore-Beumer consortium to
rejuvenate ABF plant’s facilities
Automobile Sector : Perodua Myvi production crosses 1
million mark
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