ANALYSTS UPBEAT ABOUT KIA SALES
CGS-CIMB keeps ‘add’ call on BAuto with higher target price of RM1.88
BERMAZ Auto Bhd’s (BAuto) partnership with Kia Motors Corp will likely deliver sales of about 2,000 units of Kia vehicles next year, said some analysts.
This would more than triple to 7,000 units in 2023, according to CGS-CIMB Research.
Meanwhile, MIDF Research believed that over four to five years, Kia’s sales volume could match or exceed BAuto’s Mazda volume of between 10,000 and 12,000 per annum.
On Friday, BAuto and Kia signed an agreement to form Kia Malaysia Sdn Bhd to undertake the assembly of completely knocked down (CKD) Kia vehicles.
CGS-CIMB said the partnership was BAuto’s effort to expand its portfolio offerings across the middle-to-premium segments.
It said BAuto and Kia would hold 33.3 per cent and 66.7 per cent stakes in Kia Malaysia with an initial investment of RM20 million and RM40 million, respectively.
The South Korean carmaker has also appointed BAuto’s subsidiary, Dinamikjaya Motors Sdn Bhd, as the new distributor of Kia vehicles in Malaysia.
Dinamikjaya holds the right to distribute and sell Kia vehicles, CKD and completely built-up models, genuine parts and the provision of after-sales service in Malaysia.
CGS-CIMB analyst Mohd Shanaz Noor Azam said Dinamikjaya would be a bigger sales volume driver than BAuto.
“We see an attractive opportunity for the after-sales services business given that there have been over 45,000 Kia vehicles sold in Malaysia over the past 10 years,” he said.
Shanaz said BAuto’s 29 per cent-owned associate Inokom would benefit from higher assembly volumes given that Kia Malaysia was expecting to use its production assembly in Kulim.
“BAuto could benefit from Kia’s electric vehicle roadmap strategy given that the marque’s plans to introduce 11 EV models by 2027.”
CGS-CIMB raised BAuto’s financial year ending April 30, 2022 to 2023 earnings per share (EPS) by five to 15 per cent and retained an “add” call with a higher target price of RM1.88 per share.
The higher EPS forecast takes into account new volume contribution from Dinamikjaya as BAuto might deliver a combined 16,000 and 20,500 units sales volume in financial year 2022 and 2023, respectively.
“We expect two-year earnings per share compound annual growth rate of 29 per cent (financial years 2021 to 2023).”
MIDF Research analyst Hafriz Hezry said Kia aimed to make Kia Malaysia its assembly hub for the Asean region.
Hafriz said Dinamikjaya Motors Sdn Bhd could turn in profit within the first year of operations next year, based on the targeted 2,000 to 2,500 units for 2022.