BAUTO: Earnings Dipped

Results Update

For QE31/7/2019, BAuto's net profit dropped 16% q-o-q but up slightly by 0.5% y-o-y to RM50.5 million while revenue dropped slightly by 0.6% q-o-q but rose 10% y-o-y to RM535 million.

Group revenue dropped marginally by 0.6% or RM3.3 million q-o-q mainly attributed to lower sales volume recorded from the Philippine operations because of supply constraint from Mazda Japan for the new Mazda3 and affected demand for Mazda CZ-3 due to the launch of the facelift model in the next quarter. Revenue growth from the domestic operations was flattish as its sales volume was comparable to the preceding quarter.

Group pre-tax profit dropped RM12.6 million or 16.2% q-o-q mainly due to compressed gross profit margin from the domestic operations following the Mazda CX-5 run-out promotion where more sales incentives were given to hasten the sale of this model to clear the inventories as the upcoming launch date of the facelift model draws closer.


Table: BAuto's last 8 quarters' financial performance

Graph: BAuto's last 31 quarters' financial performance  

Financial position

As at 31/7/2019, BAuto's financial position is deemed satisfactory with current ratio at 2.37 times and total liabilities to total equity at 0.87 time.

Valuation

BAuto (closed at RM2.39 last friday) has a fair PER of 10.4 times (based on last 4 quarters' EPS of 22.88sen). BAuto paid quarterly dividends which totaled 22 sen over the past 4 quarters. This translates to a dividend yield of 9.2%. Based on the above, BAuto is an attractive stock.

Technical Outlook

BAuto has been moving in sideways manner between RM1.90 and RM2.40 from late 2015 until middle of 2019. In June 2019, BAuto broke above the RM2.40 resistance and rose to RM2.75 in July. After peaking at RM2.78, the share price dropped back into the trading range again in late August. 


Chart: BAuto's weekly chart as at Sep 13, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on satisfactory financial performance & financial position and fair valuation, BAuto is a good stock for long-term investment.

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.