BAUTO’s prospects for the 2HFY20 could be better than the first riding on the recently launched face-lifted/turbo Mazda CX-5 and the all-new Mazda CX-8 which are expected to drive 55-60% of total local sales and generate better export sales to the Philippines. BUY with a TP of RM2.75 based on 13x CY20E EPS on above-industry profit margin and steady-dividend yield of 7.4%.

BAUTO launched its popular face-lifted and turbo variants of Mazda CX-5 on 30th September 2019 (CKD), and all-new Mazda CX-8 on 1st October 2019 (CKD) which are expected to drive 55-60% of the total local sales and generate better export sales to the Philippines.

The CX-5 is targeted to register c.7k units/year (current booking at c.500 unit), while the CX-8 at c.2.5k/year (current booking at c.200 unit). Both models are locally assembled at the Inokom plant in Kulim, Kedah with tentative pricing of c.RM137-180k for the face-lifted/turbo CX-5 (previously, no turbo variant at RM133k-RM174k), while the CX-8 will cost 15% to 20% more than the CX-5 CKD at c.RM175-205k.

BAuto and its partners are looking to invest up to RM200m to expand 29%-owned, Inokom’s plant production capacity from 50k to 80k units per annum by 2021/2022 to cater for the growing production demand for the all-new models. The Inokom plant has started production of its latest Mazda model in August 2019.

BAUTO has launched the all new Mazda 3 Sedan and Hatchback (CBU) in July 2019, its popular facelifted and turbo variants of CX-5 (CKD, 30th Sept), and all-new Mazda CX-8 (7-seater SUV, CKD, 1st Oct). BAUTO is also looking to bring in the all-new CX-30 (CBU from Thailand) and face-lifted CX- 3 (CBU) in Dec 2019.

BAUTO will introduce another new model (CKD based on demand) that will be introduced at the Tokyo Motor Show on 23rd October 2019 (estimated launch in CY2020/CY2021) which could be an electric vehicle (EV), tentatively in two formats; (i) full EV, and (ii) range extender powered by a small rotary engine (necessary for other markets where daily commutes are longer or Malaysia which lacks EV infrastructure).

BAUTO is committed to delivering dividend pay-out of at least 80% of PATAMI which translates into dividend yield of c.7-8%. BAUTO has been paying an average dividend pay-out of c.90% of PATAMI for the last five years.

Source: Rakuten Research - 8 Oct 2019