For QE31/7/2018, BAuto's net profit dropped 12% q-o-q but rose 149% y-o-y to RM50 million while revenue dropped 15% q-o-q but rose 24% y-o-y to RM485 million.
Group revenue dropped q-o-q mainly due to lower sales volume from both the domestic and the
Table: BAuto's last 8 quarters' financial performance
Graph: BAuto's last 25 quarters' financial performance
Current Year Forecast
With the implementation of SST on 1 September 2018, the Group is absorbing the SST for customers who have placed their bookings for Mazda cars prior to 1 September 2018, for which the delivery of the cars will take place after the said date. This is to build customer loyalty and is expected to increase costs and reduce the Group’s profitability in the coming quarter. The impact may be mitigated, however, through lower sales volatility after August this year with potentially higher sales volume, reduced marketing and advertising expenses as well as dealer incentives.
As at 31/7/2018, BAuto's financial position is deemed satisfactory with current ratio at 2.55 times and total liabilities to total equity at 0.62 time.
BAuto (closed at RM1.99 last Friday) has a fair PER of 13.5 times (based on last 4 quarters' EPS of 14.69 sen). At this PER, BAuto is deemed fairly valued. However if its earning for next quarter were to decline due to lower sales in Malaysia, the PER will rise. We will have to wait and see how much sales volume will normalize in the current quarter.
BAuto has been moving in sideways manner - with slight upward bias - for the past 3 years. For now, the range is between RM1.85 and RM2.40.
Chart: BAuto's weekly chart as at Sep 14, 2018 (Source: Malaysiastock.biz)
Based on satisfactory financial performance, fair valuation and mildly positive technical outlook, I maintain the rating for BAuto from as a HOLD.
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