BAUTO: Revenue & Earnings Fell Sharply

Results Update

For QE31/10/2019, BAuto's net profit dropped 60% q-o-q or 72% y-o-y to RM20.4 million while revenue dropped 15% q-o-q or 34% y-o-y to RM457 million.

Group revenue dropped 14.5% q-o-q mainly attributed to lower sales volume recorded from the domestic operations, partially offset by higher revenue recorded from the Philippine operations. Lower sales volume from the domestic operations mainly due to the resolution of certain pricing issues, which delayed the sale of CX-8 vehicles during the quarter. Higher sales volume from the Philippine operations mainly due to the favourable response on the all new Mazda3 that was launched during the quarter under review. The Group pre-tax profit for the current quarter under review has reduced by RM35.8 million or 55.1% mainly due to lower profit contribution from the domestic operations as a result of lower sales volume and lower margin arising from absorption of higher costs on the new facelift Mazda CX-5 model compelled by the current market sentiments.


Table: BAuto's last 8 quarters' financial performance

Graph: BAuto's last 30 quarters' financial performance  

Financial position

As at 31/10/2019, BAuto's financial position has deteriorated with current ratio at 1.90 times and total liabilities to total equity at 1.17 times.

Valuation

BAuto (closed at RM2.15 yesterday) has a fair PER of 11.8 times (based on last 4 quarters' EPS of 18.28sen). BAuto paid quarterly dividends which totaled 21 sen over the past 4 quarters. This translates to a dividend yield of 9.8%. Based on the above, BAuto is an attractive stock.

Technical Outlook

BAuto peaked at RM2.75 in July this year. Since then, it has been declining steadily. Its immediate support is at RM2.00.


Chart: BAuto's weekly chart as at Dec 10, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on weaker financial performance, I revised my rating for BAUTO to a HOLD. BAuto is still a good stock for long-term investment based on attractive valuation.

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.