Investment Highlights

• Maintain BUY on Bermaz Auto (BAUTO) with a lower fair value of RM3.10/share (from RM3.42/share) as we cut our FY25F forecast by 8% and peg it to an unchanged 12x FY25 P/E (its historical 5-year average).

• BAUTO delivered a 1QFY25 PATAMI of RM70.2mil (-30% YoY, -22% QoQ). The result was below our expectations, making up only 21% of our FY25 forecast.

• We cut our FY25 earnings forecast by 8% as we lower our ASP growth assumption to +1% YoY from our earlier +5% YoY.

• The group announced an interim DPS of 3.5sen (-30% YoY), which represents a payout ratio of 59% (+0.3 pts YoY).

• The number of car units sold was 23% and 3% lower YoY and QoQ.

• The Philippines operations continued to deliver a strong performance with a strong customer take-up.

• BAUTO is planning to buy 15% of EP Manufacturing (EPMB MK, Not Rated) for a total cash consideration of RM19.8m pending approval from Bursa Malaysia.

• The inventory turnover was at 5.9x in FY24, lower than its historical average of 7x.

• The balance sheet remains solid with a net cash of RM245mil.

• We remain optimistic on BAUTO, the new model pipeline is promising and should sell well.

• The stock currently trades at 9.2x FY25 P/E, which is at a 23% discount to its 5-year historical average.

Source: AmInvest Research - 12 Sep 2024