BAUTO: Earning's Rising Again

Results Update

For QE31/1/2018, BAuto's net profit increased 82% q-o-q or 61% y-o-y to RM40 million while revenue rose 19% q-o-q or 65% y-o-y to RM559 million.

Group revenue rose q-o-q mainly due to higher sales volume arising from the launch of the new CX-5 model in both the domestic and the Philippines market. In line with higher revenue, Group pre-tax profit soared primarily due to improved sales volume in the domestic operations arising from the new CX-5 model and higher share of profit contribution from its associate company, MMSB. The higher share of profit contribution from MMSB was mainly due to increase in production volume for the new CX-5 model to cater for both the domestic market and export to the ASEAN market (such as Thailand, Indonesia, the Philippines and Cambodia).


Table: BAuto's last 8 quarters' financial performance

From the graph below, we can see that BAuto's profits are curving up and revenue has surpassed the high recorded in QE31/10/2015.

Graph: BAuto's last 23 quarters' financial performance  

Valuation

BAuto (closed at RM2.02 yesterday) has a fair PER of 22 times (based on last 4 quarters' EPS of 9.1 sen). At this PER, BAuto is deemed fully valued. However if its earning continue to grow, the PER will drop and the stock will be more attractive.

Technical Outlook

BAuto has been moving in a sideways for the 2 &1/2 years. The range is between RM1.80 & RM2.40.


Chart: BAuto's weekly chart as at Mar 12, 2018 (Source: Shareinvestor.com)

Conclusion

Based on improved financial performance, I revise the rating for BAuto from a HOLD to a BUY.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.