Maybank Investment Bank Berhad
Date of Report: September 17, 2025

Bermaz Auto Berhad: Dividend Strength, Cash Resilience, and New Growth Avenues Amid Automotive Market Shifts

Executive Summary: Navigating Change with Strong Dividends and Asset-Light Agility

Bermaz Auto Berhad (BAUTO MK) stands out in Malaysia’s automotive distribution landscape with its robust dividend policy, cash-rich balance sheet, and adaptive, asset-light business model. As the exclusive distributor for Mazda, Kia, and XPeng in Malaysia and the Philippines, BAUTO offers a compelling blend of recurring free cash flow, prudent capital management, and strategic expansion into electrification. Despite facing headwinds from intensifying competition and regulatory changes, BAUTO’s strategic moves and financial conservatism provide both downside protection and potential for attractive dividend yields.

Investment Highlights and Valuation

– **Current Price:** MYR 0.64 – **12-Month Price Target:** MYR 0.68 (Potential Upside: +7%) – **Recommendation:** HOLD – **Valuation Basis:** 1.2x FY26E Price-to-Book (PB), reflecting strong cash position (net cash >MYR180m, about 25% of market cap) and an asset-light, cash-generative model (EBITDA >MYR120m p.a.). – **Dividend Policy:** Sustained by a sizeable cash buffer (~MYR355m or 31 sen/share), supporting a high payout ratio and capacity for special dividends.

Table: Key Financial Metrics and Forecast

Business Overview: Distribution, Brands, and Market Position

– **Core Business:** Franchise holder and sole distributor for Mazda, Peugeot (ceased Feb 2024), and Kia vehicles in Malaysia; Mazda in the Philippines. – **Market Capitalisation:** MYR 744.3 million (USD 177 million) – **Major Shareholders:** Dynamic Milestone Sdn. Bhd. (15.2%), Employees Provident Fund (10.5%), Permodalan Nasional Bhd. (8.2%) – **Free Float:** 66.1% – **Issued Shares:** 1,172 million – **52-Week Price Range:** MYR 0.61 – MYR 2.36

Mazda: New Models Spur Demand, Mass-Premium Strategy

Mazda’s latest launches, including the CX-60 and Mazda 3 (both introduced in late 3QFY26), have seen strong demand, with 500 and 1,700 bookings respectively. Overall, Mazda Malaysia’s bookings surged to about 3,000 units compared to 1,000 in the previous quarter. Future launches are slated to expand Mazda’s reach into the mass-to-premium segment, with a B-segment sub-compact SUV (CKD, FY28E), CX-80, and the new CX-5 CKD (FY27E) in the pipeline.

Kia: Inventory Challenges and Strategic Realignment

Kia continues to face challenges, notably with the need to clear Carnival and Sportage inventories (equivalent to around a quarter’s stock). The company is actively seeking stronger support from its principal and is aiming to refresh its model line-up to regain momentum.

XPeng and Electrification: Sustaining Momentum Amid Regulatory Shifts

XPeng’s electric vehicle sales remain robust, averaging over 100 units per month and yielding healthy margins. BAUTO is planning two to three new XPeng model launches in Malaysia by 2026. However, the company is working to clear about 150 units of older XPeng inventory before the expiration of CBU EV incentives at the end of 2025. Post-expiry, imported EV prices could rise by 40–50%, underscoring the urgency of BAUTO’s plans to localize production (SKD/CKD) and engage with regulators to shape the post-2025 EV tax framework.
Discussions with Deepal for additional EV partnerships remain at a standstill.

Dividend Outlook: High Visibility and Special Payout Potential

Dividend visibility is strong. BAUTO recently received about MYR 6.3m from Mazda Malaysia (a 50% payout ratio on FY25 profit of MYR 42m). Mazda Malaysia is expected to maintain half-yearly dividend distributions, supporting regular upstream cash flows.
Cash Position: While c.MYR 460m will remain at the associate level, BAUTO’s share (including holding company and associate’s net cash) still exceeds MYR 300m, or around 40% of market cap.
Dividend Yield: With an assumed 70% payout ratio, dividend yield is projected at 5%. If MYR 130m cash in Berjaya Auto Philippines (BAP) is repatriated, a special dividend is possible.

Sales Targets and Bookings: Diversified Across Brands

Associates and Regional Operations: Updates and Strategic Shifts

– **Mazda Malaysia:** Reported minor losses in 1QFY25 due to ongoing sales decline, but a recovery is expected with improved principal support and a push for new CKD export programmes. – **Kia Malaysia:** Anticipated to remain in minor losses in the near term as strategic review continues. – **Inokom:** Weak 1QFY26 results were due to lower volumes and a shift away from a cost-plus model to a more transparent, sustainable business model, which should support future profitability. – **BAP (Berjaya Auto Philippines):** Focuses on higher-margin Mazda models (Mazda 3, CX-5, CX-8) and is exploring partnerships with Chinese OEMs for range-extended vehicles (REV)/PHEV, targeting launches by end-2026.

Macro Headwinds: Competitive Pressures and Regulatory Uncertainty

BAUTO’s mass-premium focus is challenged by: – Global overcapacity. – Aggressive pricing strategies from Chinese brands. – Regulatory risks, including subsidy rationalisation, Open Market Value (OMV) implementation, and the expiration of EV incentives.
Despite these challenges, BAUTO is actively strengthening its product pipeline with new Mazda models and building a long-term EV growth path through XPeng, targeting FY26E sales of around 14,700 units.

Value Proposition and Financial Strength

– **Asset-Light Model:** Minimal capex, high cash yield, and over MYR350m in gross cash underpin sustainable dividends and provide downside protection. – **Exclusive Rights:** Strong relationships with principals and an entrenched dealer/aftersales network create barriers to entry. – **Dividend Sustainability:** Backed by net cash balance sheet (>MYR180m), recurring FCF (>MYR120m EBITDA pa), and potential for special payouts from associates and overseas cash reserves.

Financial Ratios and Performance Trends

Upside and Downside Risks

Upside Catalysts:

• Stronger-than-expected uptake of new Mazda models, driving higher sales and margins.
• Unlocking of associates’ cash reserves enabling higher dividend payouts.
• Margin improvement through cost efficiencies, enhanced EV incentives, or stronger principal support.

Downside Risks:

• Weaker demand for Mazda/Kia in a competitive mass-premium landscape.
• Prolonged losses at associate companies, eroding group profitability.
• Greater dealer incentives or an unfavorable model mix could pressure EBIT margins further.

Conclusion: Well-Positioned, But Caution Warranted

Bermaz Auto Berhad’s asset-light structure, strong cash reserves, and focus on high-dividend returns make it a resilient player in Malaysia’s automotive sector. The company’s strategic expansion of the Mazda and XPeng line-ups, combined with prudent financial management, ensures robust dividend capacity and downside protection. Nevertheless, macroeconomic headwinds, regulatory risks, and intensifying competition, especially from Chinese EV brands, suggest a measured HOLD stance at current valuations. Investors should closely monitor BAUTO’s ability to execute on new launches, manage inventory, and sustain cash flows to capitalize on any potential upside.

About Maybank Investment Bank Berhad

Maybank Investment Bank Berhad is a leading financial institution providing comprehensive research and insights into Malaysia’s equity markets, with a dedicated automotive sector team.
Note: This article is based solely on the latest comprehensive financial and strategic analysis as of September 17, 2025.