KUALA LUMPUR (Sept 12): Sales of Mazda and Kia vehicles are expected to pick up in the months ahead as analysts shrugged off Bermaz Auto Bhd’s (KL:BAUTO) weaker-than-expected quarter.

Net profit for the first quarter ended July 31, 2024 (1QFY2025) only made up about 23% of the consensus full-year estimate. Still, investors should also focus on Bermaz Auto’s above-average dividend yield of 10%, while a proposed investment into EP Manufacturing Bhd (KL:EPMB) is also a positive move, analysts said.

Bermaz Auto’s sales will still be mainly supported by its volume-heavy locally-assembled Mazda models, as well as the launch of a new Kia Sportage sport utility vehicle later this year, said RHB Investment Bank (RHB IB).

The house maintained its ‘buy’ call on the stock, noting that 1Q is seasonally weak for Bermaz Auto, and blamed a drop in sales to a higher base of comparison following large shipments of Mazda 3, Mazda 6, and imported CX-3 in 1QFY2024 to fulfil backlogged orders during the Covid-19 pandemic.

Shares of Bermaz Auto slipped 1.7% or four sen to RM2.33 on Thursday morning. The stock has lost about 9% from this year’s peak on July 16, which nearly erased its year-to-date gain.

A large majority of 10 out of 15 research houses covering Bermaz Auto nevertheless have ‘buy’ calls on the stock, with the remaining five on ‘hold’. The consensus 12-month target price is RM2.83, implying a potential return of 21% from the current share price.

EP Manufacturing investment a positive

On Wednesday, automotive parts and components maker EP Manufacturing announced a placement of 15% each to its largest shareholder Mutual Concept Sdn Bhd and Bermaz Auto to raise RM39.65 million to part-finance the construction of a manufacturing hub in Melaka.

Post placement, Bermaz Auto will own 11.54% of EP Manufacturing’s enlarged share base, making it the second largest shareholder after executive chairman and founder Hamidon Abdullah.

“We see Bermaz Auto's investment as a diversification strategy” to ensure the viability of its completely-knocked down programme, amid growing interest for domestic assembly from Chinese automotive original equipment manufacturers, said CIMB Securities.

For CGS International, the investment is “strategic” for Bermaz Auto, as the move could pave the way for future partnerships with EP Manufacturing, which recently secured two vehicle assembly agreements with China’s Great Wall Motor and Beijing Automotive Industry Corp International.

RHB IB is also positive on the move, noting that Bermaz Auto could ensure the future stability of components supply for its assembly of Mazda vehicles in Malaysia.