Berjaya  Auto  (BAuto)’s  1HFY15  (Apr)  earnings  of  MYR113.6m were within  our  and  consensus  expectations.  Maintain  BUY  and TP  of MYR4.50  (36%  upside).  Although  2QFY15  sales  grew  by  a  mere  0.2% QoQ,  earnings  were  up  2.5%  due  to  better  sales  mix  and  favourable  JPY/MYR rate. We continue to like BAuto given its undemanding FY16F P/E of just 9.4x, relative to its robust 3-year earnings CAGR of 36.5%.  
 
In  line.  BAuto’s 1HFY15  earnings  of  MYR113.6m  were  within  our  and consensus  expectations,  making  up  50.7%/53.3%  of  FY15  earnings forecasts  respectively.  We  understand  2QFY15  invoiced  sales  volumes were  about  11%  higher  than  MAA  data  but  about  3.5%  lower  QoQ (1QFY15:  3,419  units).  2QFY15  earnings  were  intact  at  MYR57.5m (+2.5%  QoQ),  largely  due  to:  i)  favourable  sales  mix  from  higher proportion  of  completely  built-up  (CBU)  vehicles  in  2QFY15,  as  well  as   ii)  favourable  JPY/MYR  rate.  We  understand  that  the  QoQ  decline  in sales volume in 2QFY15 was due to the shutdown of the paint shop from upgrading works in Oct 2014, resulting in lower production of completely knocked-down  (CKD)  CX-5  models.  A  second  interim  dividend  of  3.25 sen was declared for the quarter under review (1QFY15: 2 sen DPS).  

A stronger 2HFY15 awaits. We remain upbeat about BAuto’s prospects moving forward as we believe the launching of the highly-anticipated all new  Mazda 2 SkyActiv and Mazda 3 CKD could help sustain its growth momentum.  In  addition,  there  is  ample  room  for  margin  expansion  as well,  given  the  current  favourable  JPY/MYR  exchange  rate  and elimination of the current 5% CBU import duties from 1 Jan 2015.   

Forecasts  and  risks.  No  changes  to  our  earnings  forecasts.  The  key risks  to  our  recommendation  include:  i)  unfavourable  forex  trends,  ii) supply chain disruption and iii) weaker consumer discretionary spending. 

Investment  case.  We  maintain  our  BUY  recommendation  and  TP  of MYR4.50, based on an unchanged CY15 target P/E of 13.7x, broadly in-line  with  peer  target  valuations.  BAuto  remains  our  Top  Pick  for  the automotive sector, given its undemanding FY16F P/E of just 9.4x relative to its robust 3-year EPS CAGR of 36.5% over FY14-17F.

Financial Exhibits

Financial Exhibits

SWOT Analysis

Company Profile

Berjaya  Auto  is  involved  in  the  distribution,  assembling,  retailing  and  also  the  provision  of  after-sales  service  of  Mazda  vehicles  in Malaysia.  The  group  is  also  involved  in  the  domestic  distribution  of  locally  assembled  Mazda  vehicles  and  the  export  of  the  locally assembled Mazda vehicles.  Its subsidiary Berjaya Auto Philippines distributes Mazda vehicles in the Philippines.

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Source: RHB