BAuto has emerged as part of the distributorship for Peugeot, Citroen and DS marques through its 20% stake in Berjaya Auto Alliance – BAASB (51% owned by Berjaya Corp and 20% by BAuto). We are relatively neutral on the exercise as the contribution from BAASB is likely to be immaterial. We maintain our HOLD recommendation with unchanged TP: RM1.38 based on 14x P/E CY21.

NEWSBREAK

Groupe PSA has awarded Berjaya Auto Alliance (“BAASB”) the sole distributorship of new vehicles under the Peugeot marque and the rights of aftersales and spare parts distribution for the Peugeot, Citroen and DS marque vehicles in Malaysia; thus signalling a new partnership that is expected to enable Groupe PSA to continue to pursue its growth strategy in Malaysia. BAASB is a newly incorporated company whereby Berjaya Corp and BAuto hold 51% and 20% stakes respectively in BAASB.

HLIB’s VIEW

Neutral. We are relatively neutral on the exercise. While the exercise allows for new contribution to BAuto as the group strategized to diversify its portfolio, we do not expect material contribution/impact from BAASB. Based on MAA statistics, Peugeot sales volume was relatively small at c. 2k units per annum. NASIM (existing distributor of Peugeot) registered PATMI of RM1.3m in 2018 and LATMI -RM170m in 2019 (likely due to severe impairments). We understand that BAuto incurred only minimal cost for its 20% stake.

Forecast. Unchanged, as We Do Not Expect Material Contribution/impact From the 20% Stake in BAASB.

Maintain BUY, TP: RM1.38. We maintain HOLD recommendation on BAuto with unchanged TP of RM1.38, based on CY21 P/E of 14x. BAuto has a healthy balance sheet position with net cash of RM71.1m (6.1s/share) as of end 1QFY21 and expected dividend payout of 7.0s/share for FY21 (indicative 5.0% yield)

Source: Hong Leong Investment Bank Research - 2 Dec 2020