BERMAZ AUTO BHD

RHB Research expects a stronger year-onyear performance for Bermaz Auto (BAuto) this year, mainly driven by the company’s CX-5 sales.

“However, BAuto’s quarter-on-quarter performance was dragged down by exceptionally low Malaysian sales volume in May, due to cautious consumer sentiment during the general election and consumers holding back purchases pending the tax free period.

“Despite the two-month tax-free window in June to July, BAuto was unable to ramp up its production to fully meet the surge in demand.

“Philippines’ sales also saw a slowdown sequentially, after BAuto increased its car prices due to the Tax Reform for Acceleration and Inclusion (TRAIN) law.”

Quarter-on-quarter, RHB Research said Mazda Malaysia (MMSB) was also affected by lower sales volume.

It registered lower number of vehicles assembled and this translated to reported associate contributions of RM4.9mil.

Moving forward, the research house said it expects Malaysia’s sales volume to normalise in the upcoming quarters as BAuto starts to fulfil its estimated order backlog of 8,000 units taken during the tax-free period.

“This could sustain its monthly sales up to January/February 2019. MMSB would also benefit from this.

“This will likely offset weaker sales in the Philippines that will take some time to recover. We expect BAuto to achieve sales of 1,200 units to 1,300 units per month going forward.”

RHB Research said it made no changes to its earnings forecasts.

“Key risks to our recommendation include delays in new model launches, and weaker-than-expected consumer sentiment.

“While the soon-to-be-launched Proton X70 SUV is in the same product segment as the CX-5, it is likely to have a much lower selling price.

“While awaiting confirmed X70 pricing, the market has yet to see significant order cancellations, which could happen if the X70 is competitively priced and surpasses market expectations, leading to some down-trading.”