Logic Invest Research Blog

Author: loginvest   |   Latest post: Fri, 1 Nov 2019, 8:38 AM


Cycle & Carriage Bintang Bhd 2Q FY 2019 Results Report (HOLD)

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YTD 2Q FY19 revenue decreased 23.0% vs YTD 2Q FY18, whilst Cycle & Carriage Bintang Berhad ("CCB") net losses came in at MYR -0.3 mn 2Q 2019 vs MYR -4.4 mn in 1Q 2019. YTD 2Q 2019 unit sales fell by 27% vs YTD 2Q FY18. Looking ahead to 2H 2019, 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. However, taking into account the recently completed upgrade of the Mutiara Damansara Autohaus, it is possible that CCB’s sales will be somewhat higher than our conservative forecast.


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 1.06. Though CCB has cash equivalents amounting to about 30% 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 quarter or two. Value investors will want to collect CCB shares in the MYR 0.82 - 1.10 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 - 31 Jul 2019

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