Reported a strong core PATMI of RM60.8m for 4QFY19, boosting FY19 to record high of RM266.6m, which was within expectations. Declared fourth interim dividend of 3.5 sen/share and special dividend of 7.0 sen/share. Malaysia operation is expected to be supported with the attractive new model line-up for FY20 including M3, CX-30, CX-8 and facelift CX-5. Maintain BUY with unchanged TP: RM3.08 based on unchanged 14x P/E CY20, as BAuto is also in a net cash position of RM320m (27.5 sen/share) with projected free cash-flow of RM150- 240m p.a., supporting a sustainable dividend payout of 16-20 sen/share, translating into an attractive 7.5-8.3% yield.

Within expectations. Reported another strong set of results with 4QFY19 core PATMI of RM60.8m, boosting FY19 core PATMI to a record high of RM266.6m. This was within our expectations at 104.7% of full year forecast (consensus: 105.1%). The record PATMI was driven by strong Mazda sales deliveries in Malaysia operation.

Dividend. Recommended a fourth interim dividend of 3.5 sen/share and a special dividend of 7.0 sen/share for the quarter, increasing YTD dividend payout to 21.25 sen/share, above both HLIB’s expectation and consensus.

QoQ. Core PATMI dropped 26.0% on overall lower sales volume of Mazda models (see figure #3) in both Malaysia and the Philippines markets.

YoY. Core PATMI was relatively flat at +1.9%, as the improved margins of Malaysia operation (improved product sales mix and higher selling prices) was offset by the decline in sales and margins of the Philippines operation and lower contribution from associates following the lower production volume of Mazda Malaysia.

FY19. Core PATMI jumped 96.7% on significant Mazda sales growth in Malaysia market and higher contribution from associates MMSB and Inokom (on higher Mazda CX-5 production volume), which were partially offset by Mazda sales decline in the Philippines market.

Outlook. BAuto’s Malaysia operation is expected to remain healthy with the expected attractive line up launches of new Mazda 3 (1QFY20), new CX-30 (2QFY20), new CX- 8 (2QFY20) and facelift CX-5 (3QFY20). On the other hand, Philippines near term outlook remains challenging due to implementation of TRAIN tax reform, while management continues to focus on expanding its dealership footprint to mitigate the lower sales volume per dealership.

Forecast. Unchanged.

Maintain BUY, TP: RM3.08. We maintain BUY recommendation on BAuto with unchanged TP of RM3.08, based on unchanged CY20 P/E of 14x, supported by: (i) healthy balance sheet with net cash position of RM320.2m (27.5 sen/share); (ii) attractive new model line up to sustain sales momentum, generating strong cash flow; and (iii) high dividend yield of 7.5-8.3%.

Source: Hong Leong Investment Bank Research - 13 Jun 2019