Berjaya Auto buys stake in Mazda assembly plant

The latest Mazda CX-5 with a larger capacity 2.5-litre displacement petrol engine.

The latest Mazda CX-5 with a larger capacity 2.5-litre displacement petrol engine.

BERJAYA Auto Bhd (BAuto), which recently acquired a 20% stake in vehicle assembly plant Inokom Corp Sdn Bhd, believes that having a more profound presence in the latter would help the company have better control of its sales and growth prospects.

“Basically by acquiring the stake in Inokom, BAuto will have a representation in the assembly company,” BAuto executive director and chief executive officer Datuk Seri Ben Yeoh tells StarBizWeek.

“This is to ensure we can coordinate Mazda’s manufacturing activities at Inokom,” he adds.

BAuto distributes Mazda vehicles via the company’s wholly-owned subsidiary Bermaz Motor Sdn Bhd. At the moment, the Inokom plant in Kulim, Kedah, assembles the Mazda 3 and CX5 models.

“The CX5 is also for export to Thailand. Going forward, we hope to increase our assembling and manufacturing activities at Inokom for both the domestic and export markets,” Yeoh says.

Earlier this week, BAuto entered into separate share sale agreements for the acquisition of the stake in Inokom for RM30mil. The purchase was made via internally-generated funds.

Yeoh: ‘The acquisition enables the group to participate in the future profitability and direction of Inokom.’
Yeoh: ‘The acquisition enables the group to participate in the future profitability and direction of Inokom.’

“The acquisition represents an opportunity for BAuto to expand its business operations upstream as Inokom is the contract assembler for Mazda3 and Mazda CX-5 models in Malaysia, BAuto said in its filing with Bursa Malaysia.

“It will also enable the group to participate in the future profitability and direction of Inokom,” it said.

Inokom is involved in the assembly and manufacture of light commercial vehicles and passenger vehicles as well as contract assembly for passenger vehicles.

“Acquiring equity in Inokom would mean that we have the opportunity to participate in the growth of its business and directly relate to the potential increase in Inokom’s production capacity,” Yeoh says.

According to him, Mazda’s operations at Inokom is quite independent, with the exception that Mazda utilises the painting facilities “on a shared basis” with the products being assembled at the plant.

“We are optimistic of the potential business growth in Inokom, and Mazda will try to optimise the capacity available to generate more volume through the present and future models to be assembled in the plant,” Yeoh says.

BAuto plans to introduce three more models next year, starting with the new Mazda2 in late-January 2015, according to Yeoh.

Selldown by Berjaya Group

Over the past few weeks, Berjaya Corp Bhd unit Berjaya Group Bhd (BGroup) has been selling down its stake in BAuto.

Last month, BGroup placed out 50.06 million shares, representing a 6.19% stake, in BAuto via direct business transactions for RM160.18mil.

The transaction, which was done at RM3.20 per share on Nov 7 and Nov 10 had reduced BGroup’s stake in BAuto from 50.47% to 44.28%.

On Nov 26, BGroup placed out a further 60 million ordinary shares of BAuto for RM192mil, representing about 7.42% of the latter’s existing issued and paid-up share capital. This exercise reduced BGroup’s shareholdings in BAuto to 36.74%.

Does the series of selldowns by BGroup imply a less rosy outlook for BAuto? Yeoh does not think so.

“The selldown we believe is basically to realise some profit and also increase liquidity in the market. Mazda, as you are aware, has a good and promising range of products to be introduced within the next couple of years,” he says.

Yeoh says Mazda’s award-winning clean small capacity diesel engines should be available in the Malaysian market by 2016.

“Also the reknowned SkyActiv technology will be moving towards the second generation and this will create more interest for Mazda products, which is now gaining recognition from improved sales volume and ownership confidence.

“Mazda products are now being viewed as a unique Japanese brand and coupled with BAuto’s packaging, has given us a competitive advantage against ordinary Japanese brands.”

BAuto’s net profit more than doubled to RM56.1mil for its first quarter ended July 31, from RM26.09mil in the corresponding period last year, driven by higher revenue and improved margins.

Earnings per share of the vehicle distributor rose to 6.95 sen from 3.62 sen previously.

During the period, the company’s revenue rose 18.6% to RM507.95mil from RM428.42mil previously, mainly due to higher sales volume of Mazda vehicles in Malaysia and the Philippines.

“The sales volume in Malaysia was driven by good demand for certain completely-built-up SKYACTIV models, namely, Mazda3, CX-5 (2.5L) and Biante, as well as the BT-50 pick-up truck which received good demand from the east Malaysia market,” BAuto said in a statement accompanying its first quarter earnings.

“In the Philippines, the sales volume growth was primarily due to the group making good progress in expanding its market share, whereby the sales of Mazda2 and Mazda3 received good demand,” it explained.

As for its future prospects, BAuto said it remained optimistic it would continue to achieve satisfactory results for the remaining quarters of the current financial year ending April 30, 2015, despite the intense competition in the Malaysian automotive market and uncertainties of the effects of the goods and services tax that would come into force on April 1 next year.

Meanwhile, Yeoh says he is optimistic about the company’s sales performance for 2014.

“Sales of Mazda have improved in terms of absolute volume numbers and we will expect an increased sales volume of above 13% this year against 2013.”

According to statistics by the Malaysian Automotive Association, a total of 9,197 units of Mazda were sold last year compared with 6,332 units in 2012.