KUALA LUMPUR (March 14): Two research houses have maintained their recommendations after Bermaz Auto Bhd's (BAuto) nine-month (9MFY2024) results which came in within the estimated forecast.
RHB Bank Bhd has maintained its "buy" rating for BAuto with a new target price (TP) of RM3.35 from RM3.60, translating into a 35% upside.
In a note on Thursday, RHB said BAuto’s prospects remain exciting, as it is on track to achieve another year of record-high earnings. Though backlog has returned to pre-pandemic levels, ie 2,000 units, Mazda volumes should remain resilient in the coming quarters.
“In the Philippines, we think the newly launched Mazda CX-60 and CX-90 should continue to drive sales volumes,” it said.
BAuto remains RHB's sector top pick due to resilient car sales supported by consistent model launches and 9% FY25 yield.
Anticipating the coming growth of high earnings, RHB believes a special dividend is likely.
“Hence, we maintain our FY24F DPS [dividend per share] assumption of 25 sen, which translates to a FY24F core payout ratio of 85% and 10% yield,” it added.
Meanwhile, Kenanga Securities maintained its target price (TP) at RM2.30 based on ten times CY24F PER, at a one times multiple discounts to the sector’s average forward PER of 11 times to reflect higher earnings risk for mid-market auto players on subsidy rationalisation which will hurt their target customers, ie the middle-income group, the most.
Kenanga favours BAuto for its strong near-term earnings visibility backed by an order backlog of 22,000 units for Mazda, Kia and Peugeot vehicles, its premium mid-market Mazda brand that offers superior margins, and its attractive dividend yield of about 8%.
“However, we are concerned over subsidy rationalisation hurting its target customers, those
who are in the middle-income group,” it added.