Bermaz Auto (BAuto) recorded 3QFY18 revenue of RM559m (+65% YoY, +18% QoQ) and net profit of RM40.5m (+61% YoY, +82% QoQ). For 9MFY18, net profit of RM82.9m was below our and consensus’ expectation, accounting for only 65% and 60% of estimates respectively. For 3QFY18, sales volume increased by 14% and 18% QoQ for Malaysia and Philippines respectively. This was on the back of the launching of new CX-5 and CX-9 models in October and November 2017. Meanwhile, its pre-tax profit jump by 65% QoQ due increased sales volume from new CX-5 model as well as higher share of profit contribution from its associate, Mazda Malaysia (MMSB). We maintain our earnings forecast as we expect 4Q to remain strong. Our Outperform call on BAuto is reaffirmed with target price of RM2.41 pegged to 13x FY19 EPS. BAuto declared a third quarter interim dividend of 2.30 sen, bringing its full year dividend to 5.40 sen (9MFY17: 8.50 sen).

• Revenue for 3QFY18 grew by 18.6% QoQ to RM559.4m due to increased in vehicle sales volume in both the domestic (+13.7%) and the Philippines (+18.6%) operations. Higher sales were due to well-received response from the newly launched CX-5 and CX-9 models. For 9MFY18, revenue jumped by 9% YoY to RM1.42bn compared to RM1.31bn in 9MFY17.

• Net profit. BAuto reported higher 3QFY18 net profit to RM40.5m (+82.3% QoQ). This was largely due to increase in sales volume from the new CX-5 model. Meanwhile, higher share of profit contribution from its associate, MMSB, also helped to improve its earnings during the quarter arising from the increased in production volume for the new CX-5 model to cater for both the domestic market and export to the ASEAN (e.g. Thailand, Indonesia, Philippines and Cambodia). Its 9MFY18 however declined by 14.4% YoY to RM82.9m due to compressed gross profit margin in the 1H of the year which partly caused by the old CX-5 run-out programme as higher sales incentives were given to clear the old stock prior to the launched of new model in October 2017.

• Dividend. BAuto declared a third interim dividend of 2.30 sen (3QFY17: 2.75 sen). For 9MFY18, its dividend per share was 5.40 sen, translating to a payout ratio of 75% (9MFY17: 8.50 sen at 101% payout).

• Going forward, we expect BAuto to continue to benefit from higher demand for the new CX-5 model. Meanwhile, the commencement of export of the new CX-5 model to Thailand, Indonesia, Philippines and Cambodia is expected to drive up the profitability of its associate, MMSB.

Source: PublicInvest Research - 13 Mar 2018