PETALING JAYA: Bermaz Auto Bhd’s (BAuto) acquisition of an additional 35% stake in Berjaya Auto Alliance (BAASB), the sole distributor of Peugeot vehicles in Malaysia, will enable it to be less reliant on the Mazda marque, while also strengthening its product line-up and offerings, said RHB Research.
“Near term re-rating catalysts include the local assembly of the CX-30 SUV, which would allow for more competitive pricing and better margins,” RHB said in a report today.
BAASB is believed to have been profitable this year but RHB does not expect contributions to grow exponentially as there are inherited issues – in relation to logistics and spare parts – that require immediate attention to enable management to begin restoring the image of the Peugeot brand.
“We understand that BAuto’s immediate focus is to sort out these issues before pushing car sales. In the meantime, BAuto targets to sell 1,500-2,000 units of Peugeot cars per annum. That said, we assume Peugeot vehicle sales of 1,500 units for FY22, with a small profit of RM2.7 million or an average profit after tax of RM1,900 per vehicle.”
The research house is positive on the extension of sales tax exemption to December 2021, as this should provide support to new vehicle sales in FY22 (April). However, RHB lowered its FY22-23 Mazda vehicle sales assumptions in Malaysia to 12,890 and 13,420 units, from 13,140 and 13,490 units, taking into account the full lockdown which has halted the manufacturing of new vehicles for two weeks.
“We tweak our FY21-23 earnings by 2-3% after factoring in contributions from Peugeot and Kia. Our forecasts for both are conservative at this juncture, as we believe that both marques require time to scale. It also reflects our ringgit per 100 yen assumption of 3.69 for FY22 and 3.74 for FY23, from 4.00 previously. However, this is slightly offset by a slightly lower sales volume for FY22-23.”
Meanwhile, AmResearch is mildly positive on BAuto’s acquisition as this will tighten BAuto’s grip as a stronger non-national automotive player with three prominent brands under its belt.
“While we gather that profit contribution would only be minimal over the immediate term, we believe that this augurs well for the group’s next phase of growth in the medium to long term.
“We are also excited on the third potential Mazda CKD programme (after the CX-5 and CX-8), which will come to light soon (from our ground checks). We expect the third Mazda CKD model to make its debut in Q4’22,” said AmResearch.
It estimated that the net profit contribution will be minimal ranging from RM1.0 million to RM3.0 million over the next two years. This will be less than 2% of its FY22 and FY23 earnings. Therefore, it made no changes to its forecast.
RHB and AmResearch both maintained their ‘buy’ calls on BAuto, with RHB coming up with a new RM1.75 target price from RM1.70, reflecting a 21% upside, while AmResearch has an unchanged fair value of RM1.80 for the stock.
