BERMAZ AUTO - FY24 Above, FY25F Interesting But With Challenges

Date: 
2024-06-12
Firm: 
AmInvest
Stock: 
Price Target: 
3.42
Price Call: 
BUY
Last Price: 
2.50
Upside/Downside: 
+0.92 (36.80%)

Investment Highlights

  • Maintain BUY with an unchanged (FV) of RM3.42/share based on 12x FY25 P/E, which is its historical 5-year average. Our FY25F-FY26F earnings forecasts are unchanged, and we introduce forecast for FY27F. No change to our Neutral 3-star ESG rating.
  • BAUTO delivered a 4QFY24 net profit of RM90.2mil (-10% YoY, +28% QoQ). This brings FY24 net profit to RM351.0mil (+49% YoY). It was 5% above our expectations.
  • The group also announced a final DPS of 4.75sen (+36% YoY), which represents a payout ratio of 61%. This goes ex- div on 19 July. For FY24, BAUTO paid a total dividend (normal + special) of 26sen (+18% YoY). The dividend payment was higher than management’s guidance.
  • The number of car units sold was 14% lower YoY but crucially 1.5% higher QoQ. Lower YoY sales were expected as customers were buying ahead of the tax break expiry at the end Mar 2023. However, the better QoQ sales is a positive tone that demand and reception to the new model launches is healthy.
  • The Philippines operations continued to deliver a strong performance with a strong customer take-up. FY24 operating profit almost doubled (+98% YoY) on the back of a 63% revenue growth.
  • The inventory turnover was at 5.7x in FY24, much lower than its historical average of 7.0x. There is a surge in inventories due to new models that are not launched yet. It is likely a timing issue rather than structural.
  • The balance sheet remains solid with a net cash of RM368mil. BAUTO churned FCF of RM188mill. If this level of cashflow continues into FY25F, we believe that there is scope for another special dividend as the group will have too much surplus cash, much more than its business needs.
  • Management gave the customary mixed outlook statement; they are optimistic on the new product lineup, which is doing well. But they are also cautious due to the high- interest rate environment and volatile global markets.
  • Our positive outlook on BAUTO is premised on its:

    Impressive new model pipeline,

    Strong brand franchise with a highly loyal clientele,

    Clean balance sheet with industry-leading ROEs, and

  • The stock currently trades at 9.2x FY25 P/E, which is at a 23% discount to its 5-year historical average.

Source: AmInvest Research - 12 Jun 2024

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