MIDF affirms ‘buy’ call with RM2.70 target price

KUALA LUMPUR: Sales of Mazda vehicles by Bermaz Auto Bhd last month could test historical highs of 1,300 to 1,400 units as orders continued into the new year and given the strong demand for the new CX5, said MIDF Research.

This was also despite Bermaz having raised the CX5 price by RM1,000 last month.

MIDF estimated Bermaz’s third quarter total industry volume (TIV) to be at 3,000 units, up 19 per cent sequentially and a whopping 37 per cent year-on-year, with outstanding bookings of the new CX5 currently standing at more than 900 units.

More importantly, it said the strong TIV would come with improved margins, given the price hike for the CX5 and minimal discounting.

“We estimate this will impact Bermaz’s annual earnings by two per cent based on our conservative financial year 2019 CX5 volume of 6,000 units.”

MIDF said associate earnings, comprising 30 per cent-owned Mazda Malaysia Sdn Bhd (MMSB) and 29 per cent-owned Inokom, had been dismal in the past two quarters given low production and run-out of the old CX5.

“We expect this to improve from second half of this year, driven by launch of the new CX5 and commencement of exports of the same model to Thailand, Indonesia and the Philippines.

“We gather CX5 export rate to Thailand is now 1,000 units per month while production for Malaysia is at 900 a month.

“At this rate, we estimate total MMSB production could rise to 23,000 units a year from 9,500 to 10,000 in financial year 2016/2017,” it said.

Given a combination of the factors, including weaker yen, MIDF expects Bermaz’s third quarter 2017/2018 earnings to rise by more than 50 per cent quarteron-quarter, underpinning its view of an earnings gap-up from the second half of this year.

MIDF has affirmed its “buy” call on Bermaz and raised target price to RM2.70 from RM2.50 previously.