AFFIN Hwang Capital Research has upgraded its call for Bermaz Auto Bhd to Buy from Hold, with an unchanged target price of RM2.30, citing an attractive product lineup and the resolution of domestic issues on pricing.
Brian Yeoh, analyst of Affin Hwang, noted that the company’s second quarterly results for its financial year ending April 30, 2020, slated for release on Dec 10, is expected to be sequentially weaker due to the delay in car pricing approvals for its Mazda CX-8 model. Bermaz Auto is the marque distributor for Mazda in Malaysia, as well as in the Philippines.
“We are comforted to know that the issue has been resolved, and will not affect Bermaz Auto’s 2HFY20 outlook,” said Yeoh.
He also noted that a new model of sport utility vehicle (SUV) is coming to Malaysia. The Mazda CX-30 compact crossover SUV, sporting Mazda’s latest Kodo design language, will be positioned as a new core product, and is expected to hit Malaysian shores in the first half of 2020. With indicative pricing of RM143,000 to RM173,000, Bermaz Auto targets sales of 1,000 units per annum.
Mazda Motor Corp also firmly believes that the Asean market has growth potential, with Malaysia contributing a five-year average of 13% to the total Asean sales volume between 2014 and 2018.
Bermaz Auto is currently valued at an 11 times price-to-earnings ratio (PER), with a 6% yield for FY20.
“We believe the negatives are priced in and valuations look attractive,” said Yeoh. The target price of RM2.30 is based on a 12 times PER for the end of the 2020 calendar year.
Bermaz closed at RM2.06 as at 12.30pm, up a sen, with 477,000 shares changing hands.
