PETALING JAYA: Bermaz Auto Bhd ’s (BAuto) strong earnings momentum is expected to continue into its third quarter ending January, supported by high bookings and new launches.
AllianceDBS Research in a report yesterday said the rising popularity for sport-utility vehicles (SUV) in the country will also benefit BAuto, led by the company’s new Mazda CX-5 and upcoming Mazda CX-8 launches.
“Third quarter sales will be fuelled by high bookings, thanks to the management’s decision to absorb the sales and service tax (SST) for bookings made before its introduction Sept 1, 2018.
“This has seen BAuto receiving around 8,000 bookings. Based on recent channel checks, Mazda has orders of 3,000 to be delivered in the third quarter. As such, we expect this to support earnings, which typically is a weaker quarter.”
The research house said the new Mazda CX-5 is selling well as 80% of back orders comprise this model.
“The pricing for this model is competitive as it is locally assembled by Mazda Malaysia Sdn Bhd (MMSB). As seen in the second quarter, associates’ contribution surged from higher production of the new CX-5.”
AllianceDBS Research said growth is anticipated to normalise in 2020, supported by new model launches.
“Potential upcoming launches in 2020 are the new Mazda 3 and CX-8. The new Mazda 3 will come in as a completely-built-up (CBU) compared with completely-knocked-down (CKD) previously and could see a marginal change in price.”
The research house said BAuto’s CKD models will improve the company’s margins and support growth.
“The CKD models are the key growth drivers as they have minimal constraints and plenty of room to expand. The CKD models will also mitigate some of the group’s exposure to foreign exchange fluctuations, as the purchase price of the built-up model from MMSB is denominated in ringgit.
“With the CBU models, the approved permits required to bring in imported cars may restrict growth.
The current localisation rate for CKD models stands at 45%; an increase in the localisation rate allows the group to enjoy better margins as well as price advantages.”
Separately, AllianceDBS Research said SUV sales in the country have shown steady improvement since 2016 by between 5% and 6% per annum, adding that Mazda’s SUV sales have recorded double-digit growth during that period.