Logic Invest Research Blog

Author: loginvest   |   Latest post: Wed, 8 Jan 2020, 4:53 PM


Cycle & Carriage Bintang Bhd 3Q FY 2019 Update Report (HOLD)

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YTD 3Q FY19 revenue decreased 28.8% vs YTD 3Q FY18, whilst Cycle & Carriage Bintang Berhad ("CCB") net losses came in at MYR -17.0 mn YTD 3Q 2019 vs net profit of MYR 17.8 mn YTD 3Q 2018. YTD 3Q 2019 unit sales fell by 33% vs YTD 3Q FY18. Looking ahead to 1H 2020, management indicates that customer sentiment remains cautious. Competition for buyers is very stiff and the cost to attract customers remains high. The shift to lower margin E, GLC and GLA-Classes and continued investment in customer service and the sales network is likely to restrain margins. It is possible that CCB’s sales will be somewhat higher than our conservative forecast, but the outlook seems to be worsening since we published our most recent note.


Risks to our recommendation and target price include: i) a reduction in demand for luxury cars, ii) a weaker MYR, which would increase parts costs, iii) higher interest rates, which would lead to higher monthly payments, and iv) continued intense competition among luxury car brands.


We maintain our HOLD recommendation on Cycle & Carriage Bintang Berhad (“CCB”) whilst reducing our fair value estimate to MYR 0.92 Though CCB has cash equivalents amounting to about 16.8% of the current share price, total debt to common equity remains on the high side. Additional investment in sales and service centres is likely to crimp profits for a few more quarters. However, at some point this investment will generate a profit stream. For now, management indicates that conditions will remain challenging for at least another two quarters. Value investors will want to collect CCB shares in the MYR 0.72 - 1.02 range


Cycle & Carriage Bintang Berhad is primarily engaged in retailing of luxury motor vehicles, sales of spare parts and servicing of vehicles. The company operates in two segments: a) luxury car assembly, distribution and retailing and b) investment, via Mercedes-Benz Malaysia Sdn Bhd (“MBM”). As above, CCB will cease to be a shareholder in MBM. CCB is the largest dealer of Mercedes-Benz vehicles in Malaysia and involved in the retail and after-sales service of Mercedes-Benz motor vehicles. The Company's subsidiaries are Ipoh Motors Sdn Berhad, Srisari Sdn. Bhd., Selecsama Sdn. Bhd. and Cycle & Carriage (Malaysia) Sdn Berhad.

Source: Wilson & York Securities Research - 1 Nov 2019

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