Reported core PATMI of RM11.6m for 1QFY22 (-82.0% QoQ; +52.7% YoY). We deem the result within HLIB expectation (9.1%) and consensus (8.2%) as we anticipate earnings rebound in upcoming quarters following stronger sales driven by SST exemptions and relaxation under NRP for Sep-Dec 2021. Declared first interim dividend of 0.50 sen/share (ex-date: 15 Oct 2021). Adjusted earnings by +2.1% for FY22 and +6.9% for FY23. We maintain our BUY recommendation with higher TP: RM1.80 (from RM1.70) based on 13x P/E CY22. BAuto’s balance sheet remained strong with net cash position of RM263.1m (22.6sen/share) and expected dividend payout of 6.75 sen/share for FY22, translating into 4.3% dividend yield.

Within expectations. Reported 1QFY22 core PATMI of RM11.6m (-82.0% QoQ, +52.7% YoY), achieved 9.1% of HLIB FY22 forecast and 8.2% of consensus. We deem the result within expectations, as we anticipate a strong car sales rebound for Sep-Dec CY21, as Malaysia progress into Phase 2-3 of National Recovery Plan (NRP) and consumers take advantage of the extended SST exemptions till end CY2021.

Dividend. Declared a first interim dividend of 0.5sen/share (ex-date: 15 Oct 2021).

QoQ. Core PATMI declined by -82.0% to RM11.6m following lower sales volume in Malaysia operation (affected by implementation of FCMO in Jun-Jul) further worsened by loss of contribution from associate MMSB operation.

YoY. Despite lower group revenue (lower sales volume), core PATMI improved by +52.7%, on improved margins driven by on-going strict cost-control measures and revision of warranty and free after-sales service campaigns by end CY2021.

Outlook. BAuto’s Malaysia operation is expected to rebound strongly for the upcoming 2QFY22 and 3QFY22 quarters by leveraging on the extended SST exemptions until end CY2021 and the recent relaxation of movement controls in Malaysia. The current outstanding orders amount to 1.2k units, indicative of 1 month delivery backlog, while management is guiding for increasing new orders as Malaysia progress towards Phase 2 and 3 of NRP. On the other hand, Philippines near term outlook remains challenging due to re-implementation of the stricter ECQ (Enhanced Community Quarantine) to control the outbreak of Covid-19 in the country.

Forecast. Following incorporation of audited annual report and recent relaxation of movement restrictions, we adjusted earnings for FY22 and FY23 by +2.1% and +6.9% respectively. We also introduce FY24 earnings at RM210.3m.

Maintain BUY, TP: RM1.80. We maintain BUY recommendation on BAuto with higher TP of RM1.80 (from RM1.70), based on CY22 P/E of 13x (from 12x), following improved outlook of Malaysia automotive sector. BAuto has a healthy balance sheet position with net cash of RM263.1m (22.6s/share) as of end 1QFY22 and expected dividend payout of 6.75s/share for FY21 (indicative 4.3% yield).

Source: Hong Leong Investment Bank Research - 14 Sept 2021