BAUTO (5248) – BERMAZ AUTO BHD just released a financial report for 4QR21 with a really nice profits, after previous QRs steady increments in earnings. I just read a positive news about car sales in the US improving and analysts expecting this trend is just a start. Is this the case in Malaysia too? We known there were some government incentives and perhaps people unable to buy a new car previously now finally decided it is the time. It can be also, bit delayed, cyclical play.

Technically it doesn’t look bad either, with these great latest results out, we can expect a nice rally and maybe even a breakout above the resistance line. How will be the market reaction we will know next week only. If this growth can continue it is a big question, most probably it is a “one-off” for now, also because of re-imposition of FMCO, but for the future, maybe there is a potential.

As you can see profits increasing nicely and steady over the past QR, I know the last QR is the only one with a significant gain, but the trend so far is not bad at all. I personally expect the trend to continue in line with trends overseas, just the next QR will be probably somehow muted (FMCO factor).

Lets do some fast calculations and I present to you different possibilities:

Market Price 18. June 2021: 1.48 RM

1] Based on trailing P/E

Trailing EPS: 11.53 sen

Trailing P/E: 12.8

2] Based on prediction of future EPS

Predicted EPS for next QR: 4 sen (less because of FMCO)

Last 3 QRs + 1 predicted EPS: 14.73 sen

Predicted P/E: 10

3] Expected next QR the same

Predicted EPS next QR: 5.75 sen

Predicted EPS: 16.48 sen

Predicted P/E: 8.9

4] Expecting whole next FY the same EPS

Predicted EPS: 23 sen

Predicted P/E: 6.4

If you believe BERMAZ will enjoy good sales going forward, from calculations above it seems, based on P/E (target P/E should be around 12) and predicted earnings, the market price is undervalued in 3 of 4 possible earnings outcomes. In my opinion the sales will enjoy a good year going ahead, except the very next QR because of the FMCO, but still should be OK. In my opinion there is enough space for the market price to appreciate anywhere from 10% up to 60%.

Read about aluminim prices HERE.

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