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Monday, March 14, 2016

Brokers Report: Berjaya Auto - Still Standing

Maintain Buy with unchanged Target Price of RM2.40

Berjaya Auto Bhd
We maintain our BUY call for Berjaya Auto due to its: 

1. Attractive product pipeline going forward; 
2. Aggressive expansion from its Philippines operations, helped by a booming auto market (projected growth of 15% in 2016); and, 
3. Strong ability to capture market share (2.4% YTD from 1.5%). 

Continuously filling its product pipeline. 
We expect Berjaya Auto (BAuto) to maintain an interesting product launch schedule in 2016, mainly from its facelifted models and diesel variants. The face-lift completely knocked down (CKD) CX-5 was recently launched in February, while the CKD CX-3 is anticipated to hit the market by end-2016. As for its “diesel wave”, we believe Mazda 6 would be introduced by mid-year. The diesel CKD CX-5 is also likely to be offered, as the model is already being assembled in Malaysia for the Thailand market.     

Strong growth from the Philippines. 
The Philippines operations recorded a quarterly sales growth of 41.8% YoY, driven largely by the Mazda 2 and Mazda 3, which saw an increase of volume by 69.3% and 36.4% YoY respectively. The Philippines market would become increasingly significant for BAuto, with industry sales expected to grow 15% to 350,000 units.  

Forecasts and risks. 
We revised our earnings forecasts for FY16-18 down by 9.4%, 3.7% and 5.0% respectively. Downside risks for our recommendation and TP include: i) unfavourable forex movements, ii) disruption in product pipeline, and iii) lacklustre consumer spending.

Source: RHB Research

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