FW: Results: Bermaz Auto (BAUTO MK; BUY; TP: MYR3.00) - Ending FY18 with a bang!

 

 

Good morning,

 

Results: Bermaz Auto (BAUTO MK; BUY; TP: MYR3.00) - Ending FY18 with a bang!

 

• Core earnings and dividend beat expectations. FY4/18 core earnings of MYR143m (+19% YoY) was above our and consensus expectations at 106%/111% of full-year. FY18 DPS of 10.4sen (87% DPR) also beats our FY18 estimate of 7.0sen (60% DPR). Nonetheless, we lower our FY19/FY20 net profit forecasts by 7%/8% to account for (i) higher JPY100/MYR of 3.65 (from 3.60) and (ii) the delay in CX-8 launch to 2QFY20. Correspondingly, our TP is lowered to MYR3.00 (-8%), on unchanged 14.5x CY19 PER (mean). BAuto is our Top BUY Pick for a cyclical recovery play in the sector.
• Almost exceeded its strongest quarter in 2QFY15. Headline 4QFY18 net profit of MYR57m (+41% QoQ, +157% YoY) included a MYR3m impairment loss on receivables (MYR2m) and provision for inventories (MYR1m). Stripping off the one-offs, 4QFY18 core net profit of MYR60m (+172% YoY) jumped 50% QoQ, a tad short of its highest quarterly core earnings of MYR61m in 2QFY15. Key QoQ drivers in 4QFY18 were: (i) stronger sales/margins in its Malaysian ops and (ii) exponential growth at the associates’ level (i.e. MMSB, Inokom) to MYR14.1m profit contribution (+117% QoQ) led by strong export sales. If not for a QoQ blip at its Philippines ops, overall group revenue would have been much better, lifted by strong sales volume in Malaysia (+22% QoQ) underpinned by the strong demand for the CX-5 model; Philippines ops was hit by higher car prices as a result of new excise duties imposed from Jan 2018.
• Ride the high in sequential quarter. We expect sequential quarter results to be solid as well, driven by stronger domestic sales, on the back of lower car prices from the GST zero-rating (from 1 Jun to early Sep 2018). Alongside favourable JPY/MYR forex rate and better sales mix, we expect BAuto to start strong in 1QFY19.
• Undemanding valuations. With strong domestic and export sales outlook, BAuto is on track for a 56% earnings growth in FY19. At 11x CY19 PER currently, we believe that current valuations are still a good entry point. Besides its growth angle, dividend yield is also attractive at 6.6% for FY19; we now assume a 80% DPR from 60% previously.

 

 

Regards,

Ivan Yap | Analyst, Equity Research

Level 7, Tower C, Dataran Maybank, 1, Jalan Maarof, 59000 Kuala Lumpur, Malaysia

Tel: 03 2297 8612 | Fax: 03 2284 2137 | Email: ivan.yap@maybank-ib.com

 

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