KEY INVESTMENT HIGHLIGHTS

• All new CBU CX30 launched, slotted in between the CX3 and CX5

• Exploring a third CKD model, one option could be a hybrid

• Balance sheet is underutilized; coupled with Inokom capacity expansion, group is well positioned to explore mass market brands

• Maintain BUY at unchanged TP of RM2.70, 8% dividend yield is attractive

Launch of the CX30. Bermaz launched its all new SUV, the CX30 yesterday. Three variants are offered comprising 2 petrol (2.0G and 2.0G High) and one turbodiesel (1.8D High) variants, priced at RM143.059, RM164,059 and RM172,943. Mazda’s i-Activesense suite of safety and driver assistance systems are available with the 2.0G High and 1.8D High variants.

Positioning. The CX30 is built on the Mazda 3 platform. Size wise, the CX30, which comes only in CBU form at the moment, slots in between the current CX3 (priced at RM121K, generating 58 unit sales monthly) and the CX5 (RM137K-RM178K, generating 600-800 unit sales monthly). Based on our recent meeting with management, an initial batch of 169 units has been imported with half of this coming with ready bookings from customers.

To localize or not? It is still uncertain if the CX30 will be locally assembled for the Malaysian market, but we note that Thailand has already received the principal’s approval to produce the CX30 at the AAT (Auto Alliance Thailand) plant. At this juncture, we understand that Bermaz is negotiating to potentially localize the CX30, but there is no decision on this yet.

Eyeing a 3rd CKD. That said, we understand Bermaz is exploring localizing another SUV model. From a strategic standpoint, BAuto is looking to fill up the gap in its model mix for price points between RM120K-RM140K. The gradual increase in CX5 pricing over the years has left somewhat a vacuum within these price points. The MX30, which was launched at the Tokyo Motor Show and comes in hybrid variants (about the same size as the CX30) is a potential model under consideration, other than the CX30. We think the decision would also hinge on potential incentives for hybrids/EVs under NAP2020.

Capacity expansion. BAuto is looking to invest in incremental capacity at 30%-owned Inokom, which will see Inokom’s total capacity double to 80K/annum by Apr21 from 40Kunits/annum currently. Total capex is expected at RM200m but the bulk is expected to be funded by Inokom’s internal funds and borrowings. BAuto will occupy 50% of the enlarged Inokom capacity i.e. around 40K/annum, vs. 28K-30K/annum currently. The incremental capacity is expected to be filled up, partly, by BAuto’s 3rd CKD model.

Source: MIDF Research - 16 Jan 2020