KUALA LUMPUR (Oct 4): Bermaz Auto Bhd (KL:BAUTO) could potentially get a special dividend from its 30%-owned associate Mazda Malaysia Sdn Bhd, which could serve as a re-rating catalyst, CIMB Securities flagged on Friday.

A special dividend of between RM200 million and RM300 million from the associate could translate into RM60 million to RM90 million in income for Bermaz Auto, according to CIMB Securities’ estimate. That could add as much as 7.7 sen dividend per share and a yield of 3.4% for Bermaz, the research house said.

Minimal capital expenditure for a new local assembly programme, a stronger ringgit against the Japanese yen, and a healthier financial position at the associate “could persuade its Japanese partner to declare a special dividend,” CIMB Securities said.

The house, however, noted that it has not included the potential dividend in its current forecast.

Bermaz Auto had previously suggested a special dividend from its associate, but was not followed through due to economic conditions and potential funding needs for a new model assembly programme.

Over the past four years, Mazda Malaysia has significantly increased its cash reserves to RM668 million by March 2024, from RM378 million in March 2021, thanks to strong earnings in 2023 and 2024.

For now, the stock offers a 8.6% dividend yield and still trades at “attractive” valuations at nearly nine times forward earnings, CIMB Securities said and kept the stock on “buy” call.

CIMB Securities, however, is cutting Bermaz Auto’s volume forecast by 3%-4% due to rising competition, especially from Honda and Chery in the sports utility vehicle segment. The house lowers earnings per share estimates by 5%-9%, lowering the target price to RM2.90, from RM3.20.

“We like Bermaz Auto for its attractive dividend yields”, supported by a net cash position of RM324 million, or 28 sen per share, CIMB Securities added.