Reported core PATMI of RM44.4m for 3QFY22 (+65.9% QoQ; +32.4% YoY) and RM82.8m for 9MFY22 (+24.6% YoY). We deem the result within HLIB expectation (55.4%) and consensus (62.5%) as we anticipate stronger earnings in 4QFY22 following stronger sales driven by the extended SST exemptions and continued economic recovery under the endemic transition in Malaysia and also economic reopening in Philippines. Declared third interim dividend of 2.25 sen/share (ex date: 14 Apr 2022). We maintain our BUY recommendation with higher TP: RM1.95 (from RM1.80) based on 14x P/E CY22.

Within expectations. Reported 3QFY22 core PATMI at RM44.4m (+65.9% QoQ, +32.4% YoY) and 9MFY22 at RM82.8m (+24.6% YoY). This achieved 55.4% of HLIB’s FY22 forecast and 62.5% of consensus which we deem within expectations, as we anticipate stronger earnings in 4QFY22, as BAuto accelerates production and deliveries of cars.

Dividend. Declared third interim dividend of 2.25 sen/share (ex-date: 14 Apr 2022), bringing up YTD dividend to 4.25 sen/share.

QoQ. Core PATMI improved by +65.9% to RM44.4m following ramping up of productions and deliveries in Malaysia operation as the country transitioned into Phase 4 of NRP during the quarter and allowed the automotive sector to commence full operations again. The quarter also witnessed maiden recognition from 65% owned Kia distributorship, contributing RM4.5m to operating profits.

YoY/YTD. Core PATMI improved by +32.4% YoY and +24.6% YTD, on better sales mix, improved margins driven by on-going strict cost-control measures and revision of warranty and free after-sales service campaigns by end CY21, as well as higher YTD associate contribution.

Outlook. BAuto’s Malaysia operation is expected to continue its uptrend in coming quarters, leveraging onto the extended SST exemptions until Jun 2022 and the recovery of the economy as the country transitions into an endemic stage. The current outstanding orders for Mazda marque is c.3.5k units, indicative of 2.0-2.5 months delivery backlog. Malaysia operation is also expected to leverage onto the newly launched Peugeot new 2008, 3008 facelift and 5008 facelift and Kia marque for growth in 2022. Backlog order for Peugeot is c.300 units and Kia is c. 200 units. Similarly, Philippines market is also expected to recover following its recent eased movement restrictions to the lowest level, allowing economic activities to operate at full capacity again.

Forecast. Unchanged.

Maintain BUY, TP: RM1.95. We maintain BUY recommendation on BAuto with higher TP of RM1.95 (from RM1.80), based on a higher CY22 P/E of 14x (from 13x). BAuto has a healthy balance sheet position with net cash of RM325.5m (28.0s/share) as of end 3QFY22 and expected dividend payout of 6.75s/share for FY22 (indicative 3.9% yield).

Source: Hong Leong Investment Bank Research - 11 Mar 2022