Bermaz Auto (BAuto) net profit for 4QFY21 jumped 26 times YoY (doubled QoQ to RM66.8m), mainly due to the impact of MCO 1.0 in 4QFY20. This brings core net profit for full year FY21 to RM135.5m (+30% YoY), above our and consensus expectations, accounting for 154% and 139% of full year estimates respectively. The discrepancy was mainly due to higher sales volume and margin from domestic operations. We see headwinds for 1QFY22F due to implementation of full MCO to contain the resurgence of Covid-19 nationwide. Nevertheless, we expect the adverse impact to be mitigated by extension of sales tax exemption to 31 Dec 2021. Therefore, we maintain earnings forecasts at this juncture. As we rollover our PE-valuation to CY23 EPS, our target price revised to RM1.78 (previously RM1.46). Given a 20% upside to our current TP, we upgrade our call to Outperform. We believe its longer term growth prospect will be supported by the introduction of new model launches under Kia and Peugeot marques. During the quarter, BAuto declared a fourth interim dividend of 1.50sen and special dividend of 1.75sen bringing its full year dividend to 6.50 sen (FY20: 7.50sen).

• Revenue for 4QFY21 more than doubled YoY to RM641.2m, from RM299.4m in 4QFY20 due to higher sales volume from the domestic operations (+128% YoY) and Philippines’ operations (+30% YoY), spurred by the ongoing sales tax holiday and lower sales volume in same quarter last year attributed to the MCO 1.0 lockdown which resulted in a 44-days closure of business operation in Malaysia. Both domestic and Philippines’ market volumes were higher, +130% YoY and +38% YoY respectively.

• Net Profit for 4QFY21 jumps 26 times YoY, doubled QoQ to RM66.8m, mainly attributed to higher profit contributions from the domestic operations and Mazda Malaysia SB (MMSB). The higher profit from domestic operations was mainly due to higher margin as a result of the discontinuation of aggressive promotional campaign, favourable foreign exchange of JPY against MYR and other cost savings. However, this was partly offset by Philippines’ operations, which losses before interest and tax (LBIT) widen to RM4.3m in 4QFY20 compare to LBIT of RM0.1m in 4QFY20, despite higher revenue. It was due to lower margin arising from higher promotional activities being carried out during the quarter. Meanwhile, profit contribution from its associated companies more than tripled YoY, mainly due to improvement in gross profit and reversal of over-accrued provisions.

• Dividend. BAuto declared a fourth interim dividend of 1.50sen and a special dividend of 1.75sen in respect of FY21. This brings the total dividend to 6.50sen for FY21, translating to a payout ratio of 56% (FY20:7.50 sen at 86% payout).

• Outlook. Philippines’ operations are expected to continue to be impacted by weaker market due to the impact of the Covid-19 pandemic. Nevertheless, we understand that this will be mitigated by its minimal operating overhead. Note that BAuto had recently acquired additional 35% stake in Berjaya Auto Alliance (BAASB) from Berjaya Corp for a cash consideration of RM4.6m, stake increased from 20% to 55% and become a subsidiary of the Group effective 8 June 2021. Its contribution remains immaterial during the quarter.

Source: PublicInvest Research - 21 Jun 2021