KUALA LUMPUR, Sept 12 (Bernama) — Kenanga Investment Bank Bhd (Kenanga IB) has maintained a ‘market perform’ call on Bermaz Auto Bhd (BAUTO), citing strong near-term earnings visibility.
This is supported by an order backlog of 3,000 units comprising Mazda, Xpeng and Kia vehicles; the premium mid-market positioning of its Mazda brand, which offers superior margins; and an attractive dividend yield of about seven per cent, the investment bank noted.
However, Kenanga IB cautioned that stiffer competition in the non-national mid-market and luxury segments, coupled with slower-than-expected traction for Xpeng vehicles, may pose challenges.
“Besides, currency headwinds arising from potential monetary policy divergence between the Bank of Japan and the US Federal Reserve could weigh on the company’s market share and profitability.
“Risks to our call include consumers cutting back on discretionary spending, particularly big-ticket items like new cars, amid high inflation, supply chain disruptions, escalating input costs, and the weakening of the ringgit against the Japanese yen,” it said in a research note today.
Kenanga IB reduced its target price (TP) by 29 per cent to 60 sen from 85 sen per share, reflecting higher earnings risk for mid-market auto players on subsidy rationalisation, which is expected to impact BAUTO’s target customers, namely the middle-income group, the most.
Meanwhile, Maybank Investment Bank Bhd said it maintained a ‘hold’ call on BAUTO, noting that the near-term outlook remains challenging.
It added that current valuations have factored in softer earnings, with downside risk supported by a strong balance sheet and sustained dividends.
The investment bank also revised its TP to 68 sen from 96 sen previously.
BAUTO is principally involved in the distribution and provision of after-sales services and spare parts of three internationally renowned marques in Malaysia, namely, Mazda, Kia and XPeng.
As at 11 am, BAUTO’s shares were down five sen to 62.5 sen with 14.15 million shares traded.
— BERNAMA
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