• We like Bermaz Auto (BAuto) as the group demonstrates admirable resilience and potential for revenue generation through its diversified portfolio of marques, such as Mazda, Kia, and Peugeot, and an expanded business scope that includes retailing of CBU and CKD vehicles, after-sales services, and spare parts.

• Upside risks to earnings may come from higher-than-expected demand on the back of resilient consumer sentiment, new model and facelift launches, resilient aftersales services and spare parts, as well as cost containment measures.

• We re-initiate coverage on BAuto with a BUY call and TP of RM2.80, pegged at 13.1x PER to FY23F EPS of 21.4 sen.

• At our target price, total return including dividend yield of 4.8% is at an attractive 28.8%.

Strategic line-up in house

We favour Bermaz Auto (BAuto) as its diversified portfolio of marques, such as Mazda, Kia, and Peugeot, and an expanded business scope that includes retailing of CBU and CKD vehicles, after-sales services, and spare parts, demonstrates admirable resilience and potential for revenue generation. Its business activities are also supported by associate companies in Malaysia that are primarily engaged in the production and assembly of Mazda and Kia CKD vehicles, utilizing both local and imported parts from Mazda and Kia.

Positive outlook with caution…

BAuto is positioned to reap the benefits from a diverse range of marques, starting with Mazda, followed by Peugeot and Kia in 2020 and 2021 respectively. With continuous introduction of new models and variants, we anticipate the group will achieve steady sales volume and bookings. Its bottom line will also be lifted by favourable currency movement and normalization in costs. Near-term outlook, including a rising interest rate environment, may however dampen consumer sentiment particularly for big ticket items.

Dividend Payout

Although BAuto has a minimum 50% PATAMI dividend policy, they have consistently exceeded this, ranging from 56.4% to 93.4% during FY18 to FY22. We anticipate BAuto to declare a base dividend per share of 11 sen for 2023F to 2025F, equivalent to a yield of 4.8% based on current price.

Re-initiate Coverage with a ‘BUY’ call and TP of RM2.80

We re-initiate coverage on BAuto with a BUY recommendation and TP of RM2.80, pegged at 13.1x PER to FY23F EPS of 21.4 sen. The assigned PER is a 10% discount to 5-year average mean in view challenging macroeconomic conditions. Total return including dividend yield of 4.8% is at an attractive 28.8% which is a reflection of BAuto’s positive outlook including several reputable marques under its banner in addition to continuous effort to roll out new and replacement vehicles which generally garner strong sales volume.

Source: BIMB Securities Research - 7 May 2023