Highlights

Affin Hwang Capital Research Highlights

Author: kltrader   |   Latest post: Mon, 14 Sep 2020, 5:30 PM

 

Cycle & Carriage - Decent 2018 Results But Margin Squeeze Looms

Author:   |    Publish date:


Cycle & Carriage Bintang (CCB) delivered a decent set of results - 2018 core net profit of RM9.4m (vs. 2017 core net loss of RM1.7m) tracked above our expectations due to higher-than-expected margins. However, we think the margins are not sustainable due to the gradual shift to lower-margin models given competition among MercedesBenz’s dealers and other luxury marques. As such, we reiterate our SELL rating with an unchanged 12-month TP of RM1.48.

2018 Core Net Profit Turned Positive; Ahead of Expectation

CCB’s 2018 headline net profit of RM22.3m was a strong turnaround from the RM12.5m net loss in 2017. The stronger earnings were driven by the receipt of RM12m in insurance compensation and dividend income of RM11.2m from Mercedes-Benz Malaysia (MBM). Adjusting for the one-offs, CCB’s 2018 core net profit rose to RM9.4m (from a 2017 core net loss of RM1.7m), ahead of expectation (105% of our full-year forecast) due to higher-than-expected margins. The EBITDA margin saw a 2ppt increase to 0.9% in 2018, thanks to the zero-rated goods and services tax period (3Q: June-August 2018) and a variable incentive received in 4Q18 for hitting annual sales targets, we believe.

4Q18 core net profit declined by 24.6% qoq on lower revenue/higher tax

CCB’s 4Q18 core net profit fell by 24.6% qoq to RM3m due to: (i) lower revenue (-29.4%) on lower unit sales post the tax holiday period; and (ii) higher taxation (+22ppt to 41% in 4Q18), although this was partly cushioned by a higher EBITDA margin (+0.9ppt to 2.5%) on recognition of variable incentives.

CCB Is Unlikely to Exit Retail Business, in Our View

The Edge Weekly reported that CCB could exit the retail operations of Mercedes-Benz cars, focusing on selling spare parts and servicing Mercedes-Benz vehicles in Malaysia. We think this strategy is not feasible, considering the combined 3S theme (sales, spare parts and after-sales services) plays an integral role in a one-stop centre (inseparable). CCB has also said that it remains committed to being the partner of choice of MBM – to grow alongside MBM in growing the Mercedes-Benz brand in Malaysia’s luxury car segment.

Source: Affin Hwang Research - 27 Feb 2019

Share this
Labels: CCB

Related Stocks

Chart Stock Name Last Change Volume 
CCB 1.37 -0.05 (3.52%) 5,600 

  Be the first to like this.
 


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
Earn MQ Points while trading with MQ Traders Group
MQ Affiliate
Earn side income from MQ Affiliate Program
 
 

597  345  528  615 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 MCT 0.20+0.01 
 KANGER 0.300.00 
 ABLEGRP 0.175+0.03 
 CME 0.1150.00 
 RSAWIT 0.31+0.035 
 HBGLOB 0.21+0.01 
 TDM 0.265+0.035 
 JTIASA 0.83+0.125 
 MTRONIC 0.08+0.01 
 EKOVEST 0.565-0.015 

FEATURED POSTS

1. The Equity Market Index Benchmark in Malaysia CMS
2. Trading Scenarios of Derivatives Bursa Derivatives Education Series
3. Derivatives 101 Bursa Derivatives Education Series
4. Why Trade FKLI? Bursa Derivatives Education Series
5. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!
PARTNERS & BROKERS