PETALING JAYA: Bermaz Auto Bhd
’s (BAuto) decision to cease its distributorship of Kia vehicles is seen as a strategic step to stem future losses from the Kia segment, analysts say.
BAuto announced that it will terminate distributorship agreements, service and warranty agreements, and other ancillary agreements with Kia and its 66.67%-owned subsidiary, Kia Malaysia Sdn Bhd, pertaining to the distribution, after-sales services and supply of spare parts for Kia vehicles in Malaysia.
This followed Kia Corp Korea’s decision to manage its own brands in Malaysia.
Kenanga Research said the move reflects BAuto’s strategy to stem future losses from the Kia business, which ranged between RM6mil and RM12mil annually.
According to the research house, the Kia agreements will expire in 2026 and 2027, but BAuto will continue to work with Kia to ensure a smooth transition and minimise any interruption in vehicle services.
“As we expect losses to continue during the transition period before full cessation of its Kia business (expected in financial year 2028 or FY28), we cut both FY26 and FY27 net profits by 8% each.
“However, we raise our target price (TP) by 17% to RM0.70 from RM0.60 as we roll over our valuation year to calendar year 2027 to reflect the guided gradual turnaround starting in 2027.
“We upgrade the stock to ‘outperform’ from ‘market perform’,” Kenanga Research said in a note to clients.
Meanwhile, Hong Leong Investment Bank (HLIB) Research said BAuto stands to benefit by redirecting its resources toward strengthening its core Mazda business while continuing to grow its Xpeng electric vehicle franchise.
The research house said its earnings forecasts remain unchanged, as it does not anticipate any material impact from the exit.
It also maintained a “sell” recommendation on the stock with an unchanged TP of RM0.54 per share, based on a price-to-earnings ratio of eight times 2026‘s 6.7 sen.
HLIB Research added that while the group’s balance sheet position remains healthy with net cash of RM182.6mil or 15.8 sen per share as at end of the first quarter of FY26, earnings prospects remain weak given the challenging operating landscape in Malaysia.
Meanwhile, MBSB Research said Kia has historically contributed a modest 4% to 6% of the group’s bottom line during its profitable years.
However, BAuto recorded a share of loss of RM7.6mil in FY25 (ending April 30) from its 65%-owned Dinamikjaya Motors Sdn Bhd, after Kia sales fell 48.6% year-on-year to 951 units (7% of the group’s total).
The downturn was driven by ageing model line-ups and intensified competition.
This compares with a share of profit of RM13.2mil in FY24, which contributed around 4% to the group’s bottom line, said the research house.
MBSB Research said there is room for completely knocked down (CKD) acceleration under the new structure.
Kia Malaysia, a 33.33%-owned associate (with the remaining stake held by Kia Corp), oversees the assembly of Kia CKD models.
The company contracts its assembly work to Inokom – of which BAuto holds a 29% stake – in Kulim, which currently produces the Carnival, Sportage and Sorento.
“Kia Malaysia is also loss-making, with BAuto posting a share of loss of RM0.3mil in FY25 on 2,947 units sold, compared to a share of profit of RM8.7mil in FY24.
“Kia’s move to a principal-led model could accelerate local assembly plans for future models, but any upside ultimately depends on Kia achieving sufficient volumes to return Kia Malaysia to profitability, especially given the highly competitive non-national segment,” added MBSB Research.
BAuto assumed the Kia distributorship in April 2021, after Naza Group dropped the brand from its lineup the previous year.
At the time of writing, BAuto’s share price was 57.5 sen, giving the group a market capitalisation of RM680mil.
