BAUTO: Strong Earnings Due to Better Domestic Operation

Results Update

For QE30/4/2021, BAuto's net profit rose 102% q-o-q or 26-fold y-o-y to RM67 million while revenue rose 7% q-o-q or 114% y-o-y to RM641 million.

Group revenue improved 7%  q-o-q largely due to improvement in sales volume from the domestic operations. Higher sales volume from the domestic operations was achieved when the consumers rushed to buy new vehicles in the new calendar year 2021 and before the end of the SST Exemption in June 2021. The Group pre-tax profit for the current quarter under review has increased by RM41.3 million or 97.8% mainly because of improvement in the profit contributions from the domestic operations, higher share of profit contribution from Mazda Malaysia Sdn Bhd ("MMSB"), partly offset by lower contribution from the Philippines operations. Higher profit contribution from the domestic operations was mainly attributed to higher gross margin as a result of the discontinuation of aggressive promotional campaign, favourable foreign exchange of Japanese Yen against Malaysian Ringgit and other cost savings. Higher profit contribution from MMSB was mainly due to the improvement in gross profit and reversal of over-accrued provisions. Lower contribution from the Philippines operations, despite higher revenue, was mainly due to lower margin arising from higher promotional activities being carried out during the quarter.


Table: BAuto's last 8 quarters' financial performance

Graph: BAuto's last 36 quarters' financial performance  

Financial position

As at 31/4/2021, BAuto's financial position has deteriorated with current ratio at 2.41 times and total liabilities to total equity at 1.18 times.

Valuation

BAuto (closed at RM1.48 last Friday) has a fair PER of 12.8 times (based on last 4 quarters' EPS of 11.53 sen). BAuto paid quarterly dividends which totaled 6.5 sen over the past 4 quarters. This translates to a decent dividend yield of 4.4%. Based on the above, BAuto is deemed fairly valued.

Technical Outlook

BAuto has been trading sideways for about 12 months. If it can go above the line connecting the recent reaction high at RM1.50-1.52, its uptrend may finally begin.

Chart 1: BAuto's daily chart as at Jun 18, 2021 (Source: Malaysiastock.biz)

Chart 2: BAuto's weekly chart as at Jun 18, 2021 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance & strong financial position, I revised my rating for BAUTO to a HOLD. If BAUTO can go above the resistance at RM1.50-1.52, its uptrend will turn bullish.

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.