‘Worst is now behind Bermaz Auto’

KUCHING: The worst is now behind Bermaz Auto Bhd (Bermaz Auto), analysts opine, as the group’s sales volume is expected to normalise to 1,000 units per month on the back of its recently launched Mazda flagship products.

Based on the Malaysian Automotive Association (MAA) monthly statistics, Mazda’s sales volume of 800 units and 900 units in November and December respectively came in below AmInvestment Bank Bhd’s (AmInvestment Bank) expectations of an average of 1,000 units per month.

According to AmInvestment Bank, this was due to a one-off longer-than-expected delay of two months in the resolution of pricing issues for the CX-5 and CX-8 completely knocked-downs (CKDs).

“Management has guided that deliveries of the CX-8 has just begun, and revenue or earnings can only be recognised in December 2019,” the research firm said.

“We think that the worst is now behind Bermaz Auto. With the pricing approvals for its models in place, we strongly believe that the group’s sales volume will normalise to 1,000 units per month on the back of its recently launched flagship products the CX-5, CX-8 and CX-30.

“This should augur an impressive appraised 13 per cent earnings per share (EPS) growth for financial year 2021 (FY21F) as the group will now be coming from a relatively low earnings base in FY20.”

According to AmInvestment Bank, given the sharp drop in Bermaz Auto’s share price, the stock now offers a superior dividend yield of 7.2 per cent for

FY21F under an assumption of a fairly conservative payout ratio of 80 per cent. It recapped that the group’s payout ratio in FY19 was 94 per cent.

“We strongly believe that FY21F will also be backed by a guided pipeline of new launches: Mazda 2 completely built-up (CBU), CX-3 CBU facelift, MX-30 CBU and BT50 CBU.”

Overall, AmInvestment Bank maintained its automobile sector view that the near-term macroeconomic environment will still be challenging for foreign and premium car brands - the space where Mazda operates in - as consumers are more careful and conservative with their discretionary spending.

“However, we strongly believe that the stock is undervalued at current levels, providing an attractive entry and a decent upside for investors.”