YESTERDAY, Bermaz Auto Bhd (BAuto) acquired an additional 35% stake from Berjaya Corp Bhd (BCorp) in Berjaya Auto Alliance (BAASB), the sole distributorship of new vehicles under the Peugeot marque and the rights to aftersales and spare parts distribution for the Peugeot, Citroen and DS marque vehicles in Malaysia.
The acquisition consideration was RM4.58 mil based on the unaudited net asset value (NAV) of BAASB as of end-FY4/2021. Following the exercise, BAASB has become a 55% subsidiary of BAuto (from 20% associate previously).
While the exercise allows BAuto to consolidate the operation of BASSB, Hong Leong Investment Bank (HLIB) Research is neutral on the exercise as it does not expect material contribution/impact from BAASB.
“During previous 3Q FY2021 results, BAuto recognised a maiden contribution of RM32,000 from then 20% stake in BAASB (effective January 2021),” observed analyst Daniel Wong in a company update.
“We expect a long gestation period for BAASB to build up Peugeot’s branding while the overall market has become more competitive with the strong emergence of national marque, Proton.”
In fact, HLIB Research expects the exercise to be part of BCorp’s ongoing restructuring exercise to dispose non-core assets which include automotive segment.
“A quick browse through of BCorp’s automotive assets, we believe BAuto may be interested to acquire BCorp’s 25.5% stake in Bermaz Auto Php (BAP) which is the seller and distributor of Mazda brand vehicles in the Philippines,” suggested the research house.
All-in-all, HLIB Research maintain a “hold” recommendation on BAuto with an unchanged target price of RM1.40 based on unchanged CY2021 price-to-earnings ratio (PE) of 14 times.
“Despite the weak 9M FY2021 results, BAuto has a healthy balance sheet position with net cash of RM454 mil (39.1 sen/share) as of end 3Q FY2021,” projected HLIB Research.
AmBank Research is also mildly positive on this development as it reckoned this will tighten BAuto’s grip as a stronger non-national automotive player with three prominent brands under its belt.
“While we gather that profit contribution would only be minimal over the immediate term, we believe that this augurs well for the group’s next phase of growth in the medium to long term,” commented analyst Jeremie Yap.
The research house maintained its “buy” rating on BAuto with an unchanged fair value of RM1.80 based on FY2022F PE of 13 times.
At 9.46am, BAuto was unchanged at RM1.45 with 257,400 shares traded, thus valuing the company at RM1.69 bil. – June 9, 2021
