Investment Highlights

• We maintain our BUY call on Bermaz Auto (BAuto) with an unchanged fair value (FV) of RM1.80/share based on FY22F PE of 13x.

• BAuto announced that it is acquiring an additional 35% stake in Berjaya Auto Alliance Sdn Bhd (BAASB) from Berjaya Corp for RM4.58mil cash.

• Key points of the announcement:
  1. The valuation of BAASB at RM1.09/share, which was based on its book value as at 30 April 2021.
  2. Post-acquisition, BAuto’s stake in BAASB will increase to 55% (from 20% previously). Recall that on 1 December 2020, BAASB was awarded the sole distributorship of the Peugeot marque in Malaysia, along with the rights of aftersales and spare parts distribution for Peugeot, Citroen and DS marques in Malaysia.
  3. BAuto will not be involved in the manufacturing and assembly for Peugeot vehicles. It will still be under the Naza Group in the Gurun plant in Kedah.
  4. We estimate that the net profit contribution to be minimal ranging from RM1.0mil to RM3.0mil over the next 2 years. This will be less than 2% of our FY22F and FY23F earnings. Therefore, we make no changes to our forecast.
  5. The current CKD models are the Peugeot 3008 and 5008. We gather that management plans to launch the Peugeot 2008 CKD in end-2021.
  6. The group plans to open its first Peugeot showroom and aftersales service centre in the next few months. However, no timeline was given.
      
• Overall, we are mildly positive on this development as we think that this will tighten BAuto’s grip as a stronger non national automotive player with three prominent brands under its belt. While we gather that profit contribution would only be minimal over the immediate term, we believe that this augurs well for the group’s next phase of growth in the medium to long term.
• We are also excited on the third potential Mazda CKD programme (after the CX-5 and CX-8), which will come to light soon (from our ground checks). We expect the third Mazda CKD model to make its debut in 4QCY22.

Source: AmInvest Research - 9 Jun 2021