Bermaz’s 9M18 results garner mixed views

KUCHING: Bermaz Auto Bhd’s (Bermaz) first nine months of 2018 (9M18) results have garnered mixed views but further improvements ahead have been projected by analysts.

As per Bermaz’s filing on Bursa Malaysia, for the year to date ended January 31, 2018, the group recorded RM82.88 million in profit attributable to equity holders of the company.

Bermaz’s 9M18 earnings of RM83 million was within the research arm of MIDF Amanah Investment Bank Bhd’s (MIDF Research) estimates, at 64 per cent of its FY18F and 58 per cent of consensus, as earnings were backloaded into the second half of financial year 2018 forecast (2HFY18F).

However, the reported 9M18 profit after tax and minority interest (PATAMI) came in below the research arm of Kenanga Investment Bank Bhd’s (Kenanga Research) and consensus expectations, accounting for 53 per cent and 59 per cent of fullyear estimates respectively.

A third interim dividend per share ( DPS) of 2.3 sen was declared for the quarter, bringing 9M18 DPS to 5.4 sen, which was within Kenanga Research’s expectation.

Further improvements ahead expected by MIDF Research include a meaningfully stronger ringgit from 1QFY19 at RM3.5 to RM3.6 levels. Currently, rates have been locked in at RM3.85 up till end 4QFY18.

One the price hike of RM1,000 per car from January 2018 (only one month impact captured in 3Q18), the research arm estimated this will impact annual earnings by approximately two per cent based on its conservative FY19F CX5 volume of 6,000 units.

MIDF Research noted that further volume expansion in 4Q18 as 3Q18 captures the seasonally weak year-end period.

The research arm expected Mazda total industry volume (TIV) to expand by a further 20 per cent quarter on quarter (q-oq) and more than 50 per cent year on year (y-o-y) in 4Q18.

Additionally, MIDF Research expected sustained earnings improvements at Mazda Malaysia Sdn Bhd (MMSB) and Inokom which benefits from the higher throughout both domestically and in the export markets in Thailand, Indonesia, Philippines and Cambodia.

“Bermaz is an entrepreneur driven, highly cash generative asset-light business while the capex-intensive manufacturing unit is parked under 30 per cent-owned MMSB and is kept off-balance sheet,” the research arm said.

“MMSB itself is already selffunding. Manufacturing capex has peaked having built up production capacity to 34,000 units per annum (on two-shift) - FY19F- 20F is mostly about monetising this incremental capacity via new models i.e. CX5 and CX8 and export expansion to South East Asia ex-Vietnam.”

Meanwhile, Kenanga Research favoured Bermaz because of the group’s solid earnings recovery with the launch of its flagship model, the all-new Mazda CX-5.

The research arm also liked Bermaz for the group’s superior margins, which is head and shoulders above industry peers (average profit margin of circa eight per cent as compared to peers’ average at circa two per cent).