Maybank IB downgrades BAuto due to Mazda sales slump

MAYBANK IB Research has downgraded Bermaz Auto Bhd (BAuto) from a buy to hold after the auto group posted weaker-than-expected earnings due to a drop in sales for its Mazda vehicles.

BAuto’s net profit was 72% lower at RM20.38 mil for the second quarter ended Oct 31 from RM73.91 mil a year ago.

The auto group’s underperformance had been attributed to delays in the new facelift CX-5 and new CX-8 models which were launched at the end of September and beginning of October respectively.

The delays were due to “pricing issues”, leading to no sales of CX-8 vehicles during the quarter under review, BAuto said in a Dec 10 bourse filing.

“Results were below ours and consensus estimates due to weaker-than-expected 2Q20 earnings,” Maybank IB Research analyst Liow Thong Jung wrote in a Dec 13 note.

“These setbacks (vehicle delays) were reflected in its trade payables, which jumped 104% quarter-on-quarter to RM314 mil as at end-October,” he added.

BAuto’s weaker quarterly earnings had led Liow to cut his FY20-22 earnings per share and dividend per share estimates by 21-26%.

“Consequently, we have lowered our target price to RM2.10 (-31%), based on an unchanged 13x FY20E price-earnings ratio (five-year mean; peers average), and downgraded BAuto to hold from buy. MBM, UMW and Sime Darby are our key buys in the sector,” he said.

According to Bloomberg data, 14 analysts cover the stock with 10 buys and four holds. Investors would have earned 5.2% on the stock over the last 12 months.

BAuto’s share price remained unchanged at RM2.04 before the midday break on Dec 13.

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