KUALA LUMPUR: Affin Hwang Capital research maintained its sell rating on Cycle & Carriage Bintang Bhd with an unchanged target price of RM1.18.
In a note, it said CCB's profitability is expected to remain under pressure due to intense competition other other brands and Mercedes dealers, higher capex and opex and aggressive marketing.
However, it added that the relatively higher margins from new model launches in 2019-20E should help to cushion some of the margin erosion.
Affin Hwang expects CCB to report a lower 2019 revenue as compared to 2018, when there was a tax holiday.
"In 5M19, the total sales of Mercedes Benz (Merc) in Malaysia (by CCB and other dealers) slipped by 3.5% yoy to 5.0k units.
"Meanwhile, Merc’s main competitor, BMW, has increased its 5M19 sales by 6.5% yoy to 4.6k units (including sales of the Mini)," it said.
CCB maintained its market share of 36% amid intense competition among Mercedes authorised dealers.
The group will contiue to refurbish and expand its customer touchpoints nationwide to support Mercedez-Benz Malaysia's network development and to align with Daimler AG's corporate identity, said Affin Hwang.
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