Investment Highlights

• We maintain our BUY rating and earnings forecasts for Berm Auto (BAUTO) but lower our fair value to RM3.34/share (from RM3.42) on a rolled forward base FY25F valuation pegged an unchanged 12x P/E, at parity to its historical 5-year averag No change to our neutral 3-star ESG rating.

• BAUTO delivered with 3QFY24 net profit of RM70.5mil (-19 YoY, -22% QoQ). This brings 9MFY24 net profit to RM260.8m (+28% YoY) and makes up 78% of our FY24F net profit. W deem this result as in line with our and market consensus.

• Announced a DPS of 4.25sen (-15% YoY) which represents payout ratio of 70%. This goes ex-div on 18 April. The 9MFY2 DPS tallies to 14.

• 3QFY24 net profit was weaker YoY and QoQ due to a low number of cars sold and change in sales mix in Malaysi Furthermore, last year was exceptionally strong due to pen up demand stemming from a prolonged period of supp disruptions for the general automotive sector.

• The Philippines operations delivered a strong showing wi revenue and net profit almost doubling YoY on the back of 73 growth in cars sold.

• BAUTO’s annualised inventory turnover was at 6.9x in 3QFY2 consistent with its historical average of 7.0x. This sugges that consumer demand is stable.

• Balance sheet remains solid with a net cash of RM304mil. Th company delivered FCF of RM267mill in 3QFY24, whic equates to 30% of revenue, making it the sector leader.

• The outlook statement is mixed with management bein optimistic about its new product lineup which enjoyed goo reception and initial take-up rates. However, it is cautiou about the high-interest rate environment and volatile glob markets.

• Our positive outlook on BAUTO is due to its:
  
  ➢ Impressive new model pipeline,
  
  ➢ Strong brand franchise with a highly loyal clientele,
  
  ➢ Strong balance sheet with industry-leading ROEs, and
  
  ➢ FY24F FCF yield of 8.7%, enabling management to pa higher than its stipulated 60% dividend payout policy.

• The stock currently trades at 7.5x FY24 P/E, which is at a 37 discount to its 5-year historical average of 12x.

Source: AmInvest Research - 14 Mar 2024