New car models to sustain BAuto in challenging times

RHB Research says exposure to regional markets also an advantage

PETALING JAYA: Bermaz Auto Bhd’s (BAuto) strong model pipeline and exposure to regional markets are expected to help sustain the company during the tough, challenging automotive market currently.

RHB Research in a report yesterday said these will be the key differentiating factors that would provide BAuto with the added, competitive edge against its sectorial peers.

“BAuto recently launched the 2018 Mazda CX-3’s facelift model and the 2018 Mazda 6’s facelift model during the opening of its 3S centre in Jelutong, Penang.

“The completely-built-up CX-3 is priced at RM121,000 on-the-road without insurance, while the Mazda 6 CBU model’s pricing has yet to be revealed but likely to be between RM160,000 to RM200,000.”

BAuto is the official distributor of Mazda vehicles. Separately, RHB Research said the Philippines’ car market will take time to recover and likely remain lethargic until the end of this year.

“The year-to-date June total industry vol- ume (TIV) is down 12.5% year-on-year at 171,590 units. However, we expect year-end promotions to be a catalyst to jumpstart the market.

“Earlier this year, the Philippines government introduced the Tax Reform for Acceleration Inclusion, which caused car prices to increase.”

On a separate note, BAuto recently announced that it would honour the zero-rated goods and services tax (GST) price and absorb the sales and service tax (SST) for vehicles booked before Sept 1 – but delivered after that date.

“The impact on margins will be offset by lower sales volatility after September and potentially higher sales volumes. The higher number of Mazda cars on the road would also help lift contributions at its after-sales and service operations,” said RHB Research.

TIV dropped for three consecutive months from January to March this year, picking up slightly in April and then dropping again in May, as buyers held back their purchases in light of the uncertainty stemming from the elections that took place that month.

However, demand for cars surged immediately when the government announced that there would be a three-month “tax holiday” from June 1 to Aug 31, with GST being zero-rated during the period.

The Malaysian Automotive Association has revised downward its 2018 TIV forecast by 5,000 units to 585,000 units, as the reintroduction of SST is expected to place a huge damper on vehicle sales.

Taking these factors into account, RHB Research is reiterating a “buy” call on BAuto, with a lower target price of RM2.59 from RM2.69 previously.

“Key risks to our call include further delays in new model launches and weaker-than-expected consumer sentiment. We trim our 2019 to 2021 earnings forecast by 8% to 15%, after factoring in the SST absorption cost and taking a more conservative stance on our sales volume forecast for both the Malaysia and Philippines businesses.”