Bermaz Auto (BAuto) announced that its 20%-owned associate, Berjaya Auto Alliance Sdn Bhd (BAASB), has received an award from Groupe PSA, SA of France as the sole distributor for Peugeot vehicles in Malaysia. While this development is positive to earnings prospect, we believe the net financial impact could be muted over the immediate term. Pending more details on the Group’s plans, we keep our forecasts unchanged for now. Our Neutral call on BAuto is retained, with unchanged target price of RM1.46.

• BAASB. BAASB is a newly-incorporated company in which Berjaya Corporation and BAuto hold 51% and 20% stakes respectively. BAASB will be the sole distributor of new vehicles under the Peugeot marque, with the rights of after-sales and spare parts distribution for the Peugeot, Citroen and DS marque vehicles in Malaysia. To note, distribution rights for Peugeot marques in Malaysia was previously given to a wholly-owned subsidiary of the Naza Group, Nasim Sdn Bhd from 2008 until recently.
• Peugeot car sales in Malaysia. In 2019, Peugeot had sold 1,897 units in Malaysia, with market share of 0.3% of total industry volume (TIV). YTD 9MFY20, its vehicle sales volume declined 44% YoY to 856 units, compared to 1,526 units in the same period last year. According to Peugeot Malaysia’s official website, only two new models are offered currently i.e. SUVs Peugeot 3008 and 5008. Both models are currently assembled in Malaysia at the Naza Automotive Manufacturing (NAM) facility in Gurun, Kedah, a joint venture between Naza and Groupe PSA. Naza currently has a 38.6% stake in the plant, while Groupe PSA via PSA Automobiles SA has a 61.4% equity interest. Groupe PSA plans to make Malaysia as its export hub for the region. The Gurun plant has an annual production capacity of 50,000 units. We understand that Group PSA plans to introduce the new Peugeot 2008 model in Malaysia in the near future.
• Our view. Assuming annual volume sales of ~1900 units, Peugeot marques could contribute about RM3m annually (for the 20% stake), based on a conservative margin of ~5% (<3% of Group’s FY22F). At the moment BAASB has yet to disclose its target volume. On capital expenditure (capex) plans meanwhile, one new outlet could cost about RM2-3m (based on BAuto’s existing capex). Nevertheless, we assume BAASB will negotiate new terms with the existing Peugeot dealers for sales and after-sales service. Currently Peugeot has about 23 dealers nationwide. While the distributorship is expected to contribute positively to the earnings of the Group over the period of the distributorship rights, we keep our forecasts unchanged as further details of the Group’s plans remain unknown.

Source: PublicInvest Research - 2 Dec 2020