Period  3Q15/9M15

Actual vs. Expectations  Within expectations. The group reported 3Q15 net profit (NP) of RM46.5m (+52 YoY; -19% QoQ), bringing its 9M15 NP to RM160.1m (+90%) which made up 77% and 72%, of our and the consensus, full-year NP forecasts, respectively.

Dividends  As expected, a third interim single-tier dividend per share (DPS) of 3.35 sen was declared, bringing the YTD net DPS to 8.60 sen which implies 44% dividend payout ratio (DPR). We are expecting the group to declare a total net DPS of 9.6 sen (implies 40% DPR) in FY15.

Key Result Highlights  YoY, the 9M15 revenue registered a robust growth of 33% on the back of higher vehicle sales in Malaysia as a result of good demand for its Mazda SkyActiv models such as new Mazda2, CX-5 CKD, Mazda3 and Biante, and also higher sales contribution from Berjaya Auto Philippines (BAP) underpinned by Mazda2 and Mazda3 models. Compounded by the higher margins arising from the favourable exchange rates (weaker JPY against MYR), PBT soared by 91%.

 QoQ, 3Q15 revenue decreased by 24% due to lower sales volume of Mazda vehicles in Malaysia which we believe was mainly due to the ‘wait-and-see’ approach adopted by customers in anticipation of lower car prices post GST implementation. While EBIT recorded a narrower drop of 16% with margin improving by +1.6ppts to 16.7% (additional margins from the absence of import duties for <2.0cc Mazda car), PBT dropped by 19% with lower contribution from the associates (-128%, which we believe this was mainly affected by the temporary shutdown of Inokom’s paint shop in October and part of November for upgrading works).

Outlook  We believe consumers will continue to adopt a cautious stance amidst the uncertainties over car prices from the GST implementation, thus affecting the whole automotive industry in 1HCY15 (partly affecting 4Q15 and 1Q16 for BJAuto).

 Nonetheless, we see Berjaya Auto to be the least affected automotive player, with the macroeconomic headwinds to be buffered by: (i) its targeted customer base (middle-income to high-income group which are less sensitive to the rising cost of living), (ii) sustainable margin on the back of lower import duties from FTA with Japan and favourable exchange rates (with the huge exposure in Japanese Yen, which is currently still on a soft trend), and (iii) attractive new model such as Mazda2 and upcoming models in the pipelines such as CX-3 SUV and MX-5.

Change to Forecasts  We leave our FY15-16E earnings unchanged for now.

Rating Maintain OUTPERFORM

Valuation  Our TP remained unchanged at RM4.29. This is based on a targeted 13x FY16 PER; a valuation which is broadly in line with peers.

Risks to Our Call  Lower-than-expected vehicle sales.

 Strengthening of JPY vs MYR. 

Source: Kenanga