BAuto set for recovery, aided by stimulus plan
KUCHING: Bermaz Auto Bhd ( BAuto) is set to recover after a lacklustre financial year 2020 ( FY20) with the support of the government’s shortterm economic stimulus plan and the easing of lockdowns.
In a report, MIDF Amanah Investment Bank Bhd’s research team ( MIDF Research) noted that BAuto’s weak fourth quarter of FY20 (4QFY20) was not surprising as almost half of the quarter was impacted by the Movement Control Order ( MCO). During the quarter, Mazda’s ( Malaysia) total industry volume ( TIV) fell 52 per cent year- on-year (yo-y) while BAuto Philippines volume fell 51 per cent y- o-y. For the full year, Mazda TIV only registered at 9,484 units (down 40 per cent y- o-y).
However, the worst may be over as the research team said: “FY20 (down 62 per cent y- o-y) was a washout year impacted by issues related to price approval delays for the facelift CX5 and the new CX8 in 3QFY20 followed by the MCO throughout half of 4QFY20.
“However, we expect FY21F earnings to recover 85 per cent y- o-y off this weak base, assuming no further lockdowns, absence of the price approval issues experienced in 3QFY20 and gradually improving sales boosted by the June to December 2020 automotive tax-holiday.”
It also noted that Bauto’s 29 per cent- owned Inokom plant has yet to resume operations as the group is looking to
FY20 (down 62 per cent y-o-y) was a washout year impacted by issues related to price approval delays for the facelift CX5 and the new CX8 in 3QFY20 followed by the MCO throughout half of 4QFY20. MIDF Research
pare down its existing two to three months’ worth of inventory – 4QFY20 cash was impacted by higher working capital. Nevertheless, it said, this should be temporary; the inventory run- down should be accelerated by the potential demand boost from the tax-holiday. Post-taxholiday announcement last week, daily bookings have risen significantly to around 60 per day compared with 20 to 25 per day post-MCO.
“It is too early to determine if this is sustainable, but definitely a good early indication,” it opined.
Meanwhile, the research team at Hong Leong Investment Bank Bhd ( HLIB Research) highlighted that the recent outbreak of the Coronavirus Disease 2019 (Covid-19) has severely affected the economy and consumer sentiments in Malaysia and Philippines as well as export market to Thailand.
“Malaysia Automotive Association has forecasted TIV to drop 33.8 per cent in Malaysia while The Association of Vehicles Importers and Distribution has forecasted TIV to drop 40 per centin the Philippines,” it added.
“Nevertheless, we take some comfort on the Malaysia government implementing short term stimulus plan to support the economy, which includes full sales tax exemption for sales of local completely knocked down (CKD) units and 50 per cent sales tax exemption for sales of imported completely built up ( CBU) units from June 15 to December 31, 2020, potentially aiding automotive sales volume in a weakened consumer sentiment environment,” it said.
HLIB Research maintained its ‘ hold’ recommendation on the stock as outlook has improved for its Malaysia operation with the implementation of sales tax exemption for the automotive sector.
MIDF Research retained its ‘ buy’ call. It noted that key catalysts for its earnings recovery from 1QFY21 onwards could come from the potential introduction of a third CKD model, potential brand expansion riding on BAuto’s solid balance sheet and Inokom’s capacity expansion, and potential NAP incentives to drive CBU exports.