• We maintain our BUY call with an unchanged FV of RM3.16/share on Bermaz Auto (BAuto) based on an FY20F PE of 14.0x.

• Yesterday, we attended the official launch of the Mazda 3. Key updates are as follows:

1) The all-new Mazda 3 is a 7th generation Mazda vehicle and has three variants. It is a CBU model from Japan and is priced from RM140K to RM160K. BAuto’s sales target for this model is circa 50/month.

2) BAuto guided that it will stop production of the current CX-5 by the end of the month (July). BAuto also mentioned that it will have enough supplies of the CX-5 to cater to the demand up until September, where it will launch a new facelift of the same model. Tentatively, the sales of the new CX-5 facelift will begin around mid-September 2019.

3) The management reiterated that the CX-30 will be debuting in Malaysia, estimated November/December. It will be a CBU unit from Thailand and is estimated to be priced in the RM130K–RM145K range. It will be a 5-seater based on the Mazda 3 platform. It is said to be “the CX-4 of China”. It will be larger than the CX-3 but smaller than the CX-5.

4) BAuto plans to expand its production capacity at Inokom to 50K from 30K and intends to form a JV with either Inokom or Sime Darby for it. Estimated capex will be circa RM200 million but it will be shared based on production capacity allocation amongst the production players. This is to cater for an upcoming third unnamed CKD model. This “mystery model” will be make its entrance in the Tokyo Motor Show on 23 October 2019 with its estimated launch in end-CY2020 or early CY2021. This CKD model will be able to cater for the export market to neighbouring countries, together with the CX-5 and the upcoming CX-8 CKD.

• We believe that BAuto’s earnings will be supported by decent domestic sales and associate earnings. The addition of new models to include new CKDs should auger well for its sales in the medium to long term. An improvement in its Philippine operations will be a strong positive catalyst for the group.

Source: AmInvest Research - 18 Jul 2019