Reported core PATMI of RM33.6m for 3QFY21 (+32.7% QoQ; +31.3% YoY) and RM66.5m for 9MFY21 (-33.1% YoY), within HLIB’s expectation (64.6%) and consensus (68.3%). BAuto will continue to leverage onto the extended SST exemptions to 30 Jun 2021 for the Malaysia operation, while the commencement of vaccination programs may improve consumer sentiment towards end of CY21. Declared third interim dividend of 1.5sen/share (ex-date: 16 Apr 2021). We maintain our HOLD recommendation with unchanged TP: RM1.40 based on unchanged 14x P/E CY21. BAuto’s balance sheet remains healthy with net cash position of RM454.0m (39.1sen/share).

Within expectations. Reported 3QFY21 core PATMI at RM33.6m (+32.7% QoQ, +31.3% YoY) and 9MFY21 at RM66.5m (-33.1% YoY), within HLIB’s FY21 forecast (64.6%) and consensus (68.3%). We expect similar earnings QoQ for 4QFY21, supported by the extended SST exemptions measures to 30 Jun 2021. During the quarter, BAuto recognised a maiden contribution of RM32k from its newly owned 20% stake in Berjaya Auto Alliance (effective Jan 2021).

Dividend. Declared a third interim dividend of 1.5 sen/share (ex-date: 16 Apr 2021), bringing total dividend to 3.25 sen/share in 9MFY21.

QoQ. Core PATMI improved by 32.7%, mainly driven by higher net contributions from associates (MMSB and Inokom), coupled with improved margins mix from Malaysia operations and lower net interest expenses.

YoY. Core PATMI improved by 31.3%, mainly driven by higher Malaysia sales volume (+60.4%) on the back of SST exemption measures, which was partially offset by loss making BAP (Philippines) and lower MMSB contributions.

YTD. Core PATMI declined by 33.1% YoY, dragged by deteriorated car sales mix (on lower margin CBU models in Malaysia), higher provisions for warranty and free services for Malaysia operation, loss-making Philippines operation and lower MMSB contributions.

Outlook. BAuto’s Malaysia operation will continue to leverage on the SST exemptions until 30 Jun 2021. On the other hand, Philippines near term outlook remains challenging due to implementation of GCQ (General Community Quarantine) to control the outbreak of Covid-19 in the country. The commencement of vaccination program in Malaysia and the Philippines may improve market sentiment towards end CY21. Upcoming new model launches include MX30, BT-50 and CX-30 CKD. Furthermore, BAuto is also believed to be the front-runner to secure the distributorship for Kia marque in Malaysia.

Forecast. Unchanged.

Maintain HOLD, TP: RM1.40. We maintain HOLD recommendation on BAuto with unchanged TP of RM1.40, based on unchanged CY21 P/E of 14x. Despite the weak 9MFY21 results, BAuto has a healthy balance sheet position with net cash of RM454.0m (39.1s/share) as of end 3QFY21.

Source: Hong Leong Investment Bank Research - 11 Mar 2021