Berjaya Auto is still our top auto pick. After rolling over our base year, we lift our TP to MYR4.70 (19% upside, MYR3.36 ex-bonus) and maintain BUY. Its strong product suite and pipeline of new Mazda models wouldensure continued market share gains and the ability to resist discounting. This would be an important attribute, with the automotive market remaining highly competitive as it enters a soft patch post GST.

• Another solid quarter. Berjaya Auto will report 4QFY15 (April) earnings on 10 Jun, with another solid quarter in the cards and a QoQ sales volume growth of about 40%. We expect FY15 sales to meet our forecast of 12,325 units.
• Mazda to continue gaining market share. Mazda’s market share rose to 2.0% at end 1Q15 (2014: 1.7%). We expect Mazda to remain wellpositioned for further gains. The B-segment Mazda 2 was launched inJan 2015 and the locally-assembled Mazda 3 in April. The Mazda 2 has received global acclaim while the local Mazda 3 is extremely pricecompetitive and well-equipped. Deliveries of the facelifted CX-5 and Mazda 6 would also begin after June. The eagerly-anticipated CX-3 SUV is also expected by 4Q15 – which could provide Berjaya Auto a product to directly compete with the popular Honda HR-V that is reportedly enjoying a waiting list of 3-4 months. The strong product range and pipeline would enable Berjaya Auto to maintain price discipline and avoid discounting that erodes margins and saps its brand premium. This quality is important, since the market is entering a post-GST period with big ticket consumer discretionary spending expected to wane. An investment to enhance the paint shop at the Inokom plant is also being considered if plans to locally assemble the CX-3 come to fruition.
• Forecasts and risks. We trim our earnings forecasts for FY15-17 by 1.4%, 9.3% and 6.8% respectively after tweaking down our margin assumptions to reflect a softer market. Risks to our recommendation are: i) unfavorable forex trends, ii) supply chain disruption , and iii) weaker consumer spending.
• Top Pick. We revise our TP to MYR4.70 (MYR3.36 ex two-for-five bonus issue) after rolling over the base year to 2016 (from 2015) and applying an unchanged 13.7x target P/E. Valuations remain undemanding (2016 P/E of 11.4x) relatively to its 3-year FY14-17 EPS CAGR of 30.2%. BUY.