Investment Highlights

• Our BUY call on Bermaz Auto (BAuto) is maintained with a higher fair value (FV) of RM2.70/share (from RM2.63/share previously), premised on a FY24F PE of 12x, on par with its 10- year mean. Our FV also reflects an unchanged neutral ESG rating of 3 stars.

• According to Malaysia Automotive Association (MAA), Mazda sold 4,857 units from February 2023 – April 2023, which will be reflected in the BAuto’s 4QFY23 results. Given that there were 10,771 units sold in 9MFY23, the upcoming 4QFY23 vehicles sales will likely bring its full year units to 15,628, exceeding our earlier Mazda volume assumption by 11%.

• On the other hand, we cut our FY23F sales assumption for Philippines, Kia, and Peugeot brands by 10% to 5,200 units in total, on lower estimates for some premium models for Mazda such as CX-9 and MX-5, as well as Kia’s Sorento and Sportage in which contribution will only be seen in FY24F onwards. All in, BAuto is likely to achieve group sales of 20,800 units, exceeding its FY23F sales target of 19,000.

• Our sales assumptions for FY24F–FY25F, however, remain largely unchanged at 21,000 units. After updating our model based on data from MAA, our FY23F topline is now raised by 3%.

• We tweaked our FY24F-FY25F revenue lower by 1% following the conversion of its CBU CX-30 into CKD version which has a lower price point. However, our FY23F-FY25F earnings climbed by 3%-4% as CKD commands a margin that is 3%- point higher than CBU on average.

• As at end-April 2023, BAuto has a solid order book pipeline of 3-5 months for Mazda cars at 6,500 units, providing earnings visibility until 1QFY24. For the order book, 40% or 2,600 units were from CKD CX-30 whereas CX-5 and CX-8 make up the remaining portion.

• Separately, outstanding bookings for the KIA and Peugeot brands can be delivered within 2 weeks on average.

• Despite the conclusion of sales tax exemption window in March this year, BAuto’s outstanding order book has consistently held above 1,000 units per month, implying sustained buying interest on Mazda cars.

• Subsequent to the launch of its CKD CX-30, we are also expecting: a) KIA – 1) All-new Sportage, EV Niro, and Carens (KY) potentially in 4QCY23-1QCY24 b) Peugeot – EV2008 possibly in 4QCY23-1QCY24

• The group currently trades at a compelling CY23F PE of 10x versus its 10-year average of 12x with an attractive FY23F dividend yield of 6%.

Source: AmInvest Research - 24 May 2023